Stocks closed the month with healthy gains. Both the Dow and S&P 500 rose more than 4%, while the Nasdaq rose nearly 7%. And that adds to the even bigger protests in April. The major European indices and Japan’s Nikkei also enjoyed solid pops in May.
Sure, stocks could head south during the summer. But the May to September crash that sometimes happens on Wall Street may not happen this year for several unique reasons. As Mark Hackett, head of investment research at Nationwide, noted in a report in early May: “Little of this year has followed historical patterns.”
Finally, given the massive market pullback in March, it is arguable that expectations for even more dire economic data and weak reports of corporate earnings in the coming quarters are already priced in stocks. Investors may already be looking to 2021, and the possibility of a strong pickup in global economic and earnings growth. Consumers, armed with stimulus controls, can increase their spending.
And a second wave of Covid-19 cases also has the potential to derail a rebound, leading to a longer W-shaped double-dip recovery. The excitement over stimulus, a shot, and the reopening of the United States could fade.
“The road to recovery will be a long one … with many two steps forward, one step back,” said Christine Short, vice president of market research for TipRanks, in a recent report. “It is true that markets tend to hit bottom long before economic indicators … but I don’t think anyone is anticipating that we will return to ‘normal’.”
US unemployment rate could peak in May
Coming soon: Economists polled by Refinitiv expect to know Friday that the U.S. economy cut nearly 8.3 million jobs last month, in addition to the 20.5 million jobs lost in April. It is predicted to raise the unemployment rate to 19.7% from 14.7%.
That would be the highest unemployment rate in the US. USA Since 1935, during the Great Depression, according to annual historical estimates by the US government. USA
But the data indicates that the worst may have happened. Capital Economics economist Michael Pearce notes that continued jobless claims have decreased, an encouraging sign.
“The drop in continuing claims suggests that labor market conditions are now beginning to improve again as workers are removed from their jobs, either because their employer has received funds through the Payment or because companies have reopened, “Pearce said in a recent note to customers.
However, the next recovery is not expected to feel uniformly across all parts of the labor market, and economists remain unsure exactly how many Americans will be rehired in their previous jobs.
Until next time
Monday: US manufacturing data USA And China
Friday: US jobs report USA