Hopeful Exuberance… | May 29, 2020

AUTHOR: Kerry J. Hilsabeck, CFP®
TITLE:    Investment Adviser Rep
TAGS:   Unemployment, Housing & Building, Yield Curve, Manufacturing & Services, S&P 500

Markets rose 3% last week. Was investor exuberance founded or an unfounded move on being hopeful?


Memorial Day


Markets opened the week with a bang as markets were up 2% at the start of the day. They held most of the gains throughout the day with notable strength in value stocks like financials. Weakness was relative as tech stocks lagged on the day, down about .10%. Tensions over China/US trade relations caused concerns for companies like Apple.


Trade tensions extended on Wednesday as the US declared that Hong Kong is no longer considered independent from China. This means that financially and economically Hong Kong agreements with the US are now in question. This could also cause retaliation from China, including revisions to commitments from the phase one trade deal. These tensions have caused FAANG stocks (Facebook, Amazon, Apple, Netflix and Google) to slow in growth the last few days. Economic re-openings also slowed stay at home tech stock growth as well. All this said, markets rallied today, and the S&P 500 closed above 3,000 for the first time since early March! This was a bullish technical indicator as the index moved back above its 200-day moving average.


Oil inventories surprisingly rose, initial jobless claims increased 2.1M last week, and yet the markets climbed from the open. They gave way late in the day as tensions between the US and China dominated late trading.


Everything started in the red on Friday as there was much anticipation around a potential shift in foreign policy with China. A press conference late in the day shed light that little change should be expected in the short-term. This sent markets north, ending the day up .48%.


The overall tone from investors for the week was that of optimism. Data was poor throughout the week and investors looked past that to the re-opening of economies as a sign of hope for things to begin to return to an economic normal. This optimism, while understandable, may be a bit premature. Concerns still remain of a secondary wave and escalating tensions at home and abroad. These could cause turbulence in the short-term that does not appear to be priced into the current exuberance.

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