Markets “In a Nutshell” for June 16, 2020
Investment Week at a Glance
Stocks finished down for the week. The Dow Jones Industrial Average was down 5.55%, the S&P 500 fell 4.78%, the New York Stock Exchange Composite (2,000 stocks) fell 6.12% and the average investors index (Value Line Index) was down 7.85%. Foreign stocks (DJ Global ex U.S.) were down 2.63%. Bond prices were higher for the week, with the 10-year U.S. Treasury ending the week 20 basis points lower at 0.71%. (Data source: Wall Street Journal)
Stocks Drop Sharply on Renewed Uncertainty
U.S. stocks hit the brakes on its sharp rally and fell almost 5% on the S&P 500 after optimism over a quicker than expected recovery was dampened. Most of the fall this week can be attributed to Thursday’s nearly 6% decline after the Fed cautioned that, while they remain committed to ultra-supportive policies, the job market is going to take years to fully recover to the levels seen just 4 months ago. The deep drop in stock prices was also the biggest drop since mid-March, during the worst of the sell-off, and showed that the volatility that has seemingly disappeared in the past couple of weeks is still very much around. While every economist and analyst has already been stressing the uncertainty in their forecasts of the economic recovery, last week showed just how disconnected the stock market can get from the actual data. (Barron’s)
Reopening and Rehiring
Many of the largest and hardest hit states and cities have started the process of opening back up in a promising sign that the damage done to the economy by the virus lockdown has a chance to begin to heal. Even New York City, the hardest hit city in the U.S., reopened nonessential retail and construction in the city’s Phase 1 of their reopening. With another stimulus package still on hold for the time being, many of the enhanced benefits to unemployed workers remain uncertain as to whether they will be extended past their expiration in July. This puts an enormous amount of pressure on businesses to rehire in the coming weeks and puts the financial health of the U.S. consumer at risk. At about two thirds of the U.S. economy, consumer spending is easily the most important aspect of the economy and will certainly determine the pace of the recovery. (Barron’s)
In the World Bank’s annual report released last week, what percentage of countries are estimated to have a drop in economic output this year?
Have a Great Week!
4. The World Bank estimates that 93% of countries will see a drop in economic output this year. For comparison, 60% of countries reported drops in economic output in the financial crisis of 2009 and 80% did during the Great Depression. (Barron’s).