Markets “In a Nutshell” for May 11, 2020
Investment Week at a Glance
Stocks were up last week. The Dow Jones Industrial average gained 2.5% while the S&P 500 was up 3.5%. The New York Stock Exchange Composite (2,000 stocks) jumped 2.6%. The “average investor’s index” (Value Line index) soared 4.5%. Foreign stocks (EAFE index) were up 1.1%. Bond yields rose (bond prices up) as the 10-year Treasury ended at 0.68%. (Sources: Barron’s, Wall Street Journal)
Ugly, But Not Unexpected Economic Numbers
The Labor Dept reported 20.5 million jobs lost in April as the unemployment rate soared to 14.7%. The jobs losses erased all the jobs gains for the last 10 years. Coupled with the annualized GDP drop of 4.8% last week, the numbers coming from the economy are not unexpectedly among the worst since the Great Depression of the 1930’s as the global economies have been shut down. But as bad as the numbers are and will be for this quarter, we should also expect strong rebounds as the economy opens. (Sources: Barron’s, Wall Street Journal)
Stocks Continue to Rally. Why?
In the face of deepening poor economic news, stocks have continued to go up. Broad market stock indexes are now up 20-30% from the March lows. So, the question often asked by our clients is how can the stock market keep going up with the economy falling? Many stock analysts (including us) see two major reasons: One is that the stock market is looking past 2020 and to a better 2021. The other is the Federal Reserve stepping in and backstopping the stock and bond markets (by printing money and buying financial assets). So far this year the Fed has printed over $6 trillion in response to the COVID-19 crisis. (Sources: MarketWatch, CBNC)
Which of the following sectors had the best return last week?
a. Oil & Gas
d. Health Care
Have a Great Week!
a. Oil & Gas, up 8.1%