Market Volatility Update: What’s Our New Normal?
States are reopening phase by phase and the economy is inching upward, but there is still more to be done even as 2 million jobs were created this past month. As businesses begin to operate in our new reality, there are still 40.8 million people unemployed as of May 28, 2020*- and the future of the economy remains uncertain. What can investors do in this new normal and how can they protect their investments?
COVID-19 and unemployment numbers
There are seemingly fewer new U.S. cases and fewer deaths related to COVID-19* overall, though cases are starting to rise in states like Texas, Florida, and Arizona. While the economy is still on uncertain ground, unemployment numbers are starting to improve. In May, 2.4 million jobs were created even as the estimated job loss was 8.3 million. The unemployment rate is down to 13.3% from a high of 14.7% - and while that’s certainly good news, 40.8 million people are still unemployed as of May 28, 2020**.
*Source: https://www.worldometers.info/coronavirus/country/us/
**Source: https://fortune.com/2020/05/28/us-unemployment-rate-numbers-claims-this-week-total-job-losses-may-28-2020-benefits-claims-job-losses/
The stock market is continuing to do well
At this point, Congress is still injecting money into the economy, which is helping out the stock market and positively affecting the bond market. The S&P 500 is up 47%* from the low we experienced on March 23. Most of the rallying that we’re seeing is due in large part to the performance of stocks in the technology sector. But with the unemployment rate that we’re at and with the knowledge that – even though businesses are beginning to reopen – some businesses won’t survive this period, it remains to be seen whether or not the stock market will continue to bounce back.
*Source: https://www.cnbc.com/2020/06/07/stock-market-futures-open-to-close-news.html
Are we headed toward a recession?
Businesses are still hurting financially, and it is likely that we’ll have an additional quarter of negative economic growth as measured by GDP. Therefore, we’ll technically be in a recession. Additionally, since the stock market is doing well, there is some speculation that we might not be in a recession for very long. However, there’s no real way to forecast: Some companies have chosen not to project earnings because it’s difficult to do in these conditions. What we don’t want is to have a repeat of the dot com bust of the 2000s era. We also have to be aware that the situation will continue to be volatile as we consider the consequences of inflation, and that the dollar may weaken. In addition, the fact that we’re in an election year in the U.S. may influence the markets as well.
What can investors do right now?
For investors, it is natural to be concerned, but the main detail to remember is that it is important not to react emotionally and to make snap decisions based on what you see or hear. Whether you want to sell your stock or invest in more, it’s crucial to be cautious - and those decisions are something you absolutely want to discuss with your financial advisor. If you have any questions, concerns, or are ready to make some changes to your portfolio, feel free to contact us.
Sincerely,
The Team at Chatterton & Associates
