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Last week’s mostly peaceful Riots bring mostly peaceful protests over the weekend and it seems the market is the only thing watching to our countries grand re-opening

by Fortem Financial June 8, 2020

We are indeed living in strange times. After a weekend of peaceful protests and violent riots, stocks opened higher today on optimism for a quicker than expected economic recovery. The S&P 500 closed out last week higher by almost 5%, erasing the losses incurred since the beginning of March. The market recovery was also observed in small and mid-cap stocks where the S&P MidCap 400 and Russell 2000 were both up over 8% last week. Investors eagerly awaited last Friday's job report because fears of a depression like surge in unemployment could vault the economy into a prolonged slide. However, the trend towards risky assets continued, and last Friday we received a much stronger-than-expected May jobs report that should continue to fuel investor optimism for an economic recovery.

Economists consensus estimates for the jobs report were 7.5 million jobs lost, but in an unprecedented reversal the number came in at +2.5 million growth in payrolls. Moving to monetary policy, the Federal Reserve had promised to make it easier for corporations to gain access to financing throughout the pandemic. In response to the Fed's policies, companies have borrowed a record $1.1 trillion dollars since the beginning of the year. The increased borrowing is nearly twice the pace set back in 2019. After a failed House bill to pump an additional $3.5 trillion stimulus dollars into the US economy, President Donald Trump said he would ask congress for more economic stimulus to aid in the recovery. The new stimulus is expected to be closer to $1 trillion dollars.

The president’s top economic advisor, Larry Kudlow, remarked that there could be a return-to-work incentive as one option to deliver the funds. Looking ahead to next week, economic releases include CPI and PdPI as well as the Federal Reserve Open Market Committee’s decision on interest rates.

The bond market is moving with the recovery as well. The yield curve steepened last week as long-dated U.S. Treasury Bond yields pushed higher and the 10-Year Treasury yield surged to its highest level since March. Although the violent protests can be unnerving, investors seem to have digested the news and it has had little impact on financial markets. Investors seem to be focused on the reopening of the U.S. economy.

Green shoots appear to be emerging. Although May ISM Manufacturing and ISM Non-Manufacturing Indexes both signaled contraction for the month of May, it is important to note that the ISM data displayed is an improvement from April levels. Unemployment is also moving back down; the current rate of 13.3% is 1.4% decrease from April.
Source: First Trust


Chart reflects price changes, not total return. Because it does not include dividends or splits, it should not be used to benchmark performance of specific investments

Sincerely,

Fortem Financial
(760) 206-8500
team@fortemfin.com

 

 

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Data Sources: News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market Data: Based on reported data in WSJ Market Data Center (indexes); U.S. Treasury (Treasury Yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.

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The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighed index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indices listed are unmanaged and are not available for direct investment.

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