Investors did not sell in May. Now what?

Investors did not sell in May. Now what?

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.”

For one thing, the Federal Reserve and other central banks around the world are spending trillion in loan packages to help severely affected consumers, businesses and local governments.
Investors also hope that a biotech company or Big Pharma can come up with a vaccine or viable treatment for the new coronavirus.

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.

Of course, Wall Street could end up being very wrong. The V-shaped recovery that many hope could turn out to be Nike swoosh more gradual.
Nervous consumers, many of whom are out of work due to the outbreak, also cannot use their Check Protection Program money to shop. In fact, United States government data showed on Friday that spending fell more than 13% in April. Consumers are saving much more, and only a handful of large retailers with a significant online presence (think Amazon, Walmart, and Target) are really benefiting from any increase in 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.

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“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

Since mid-March, more than 40 million Americans they have applied for their first week of unemployment benefits. But over the past eight weeks, the number of new claims has decreased, giving investors and economists confidence that the unemployment rate in the United States peaked 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.

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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.

A worksheet Published by the National Bureau of Economic Research earlier this month, it was estimated that 42% of recent layoffs could lead to permanent job loss.

Until next time

Monday: US manufacturing data USA And China

Tuesday: Reserve Bank of Australia interest rate decision; Dick’s Sporting Goods (DKS), CrowdStrike (CRWD) and Focus (ZM) Profits
Wednesday: unemployment rate in the euro area; Bank of Canada Interest Rate Decision; ADP private employment report; US Service Data Campbell soup (CPB) Profits
Thursday: decision on the ECB interest rate; Initial and continuing unemployment claims from the United States; J.M. Smucker (SJM), Gap (Gps), Loose (JOB) and Broadcom (AVGO) Profits

Friday: US jobs report USA

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Cory Weinberg

About the Author: Cory Weinberg

Cory Weinberg covers the intersection of tech and cities. That means digging into how startups and big tech companies are trying to reshape real estate, transportation, urban planning, and travel. Previously, he reported on Bay Area housing and commercial real estate for the San Francisco Business Times. He received a "best young journalist" award from the National Association of Real Estate Editors.

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