Shifting Gears | May 15, 2020

AUTHOR: Kerry J. Hilsabeck, CFP®
TITLE:    Investment Adviser Rep
TAGS:   Jobs, Goods, Yield Curve, S&P 500, Michigan Consumer Sentiment

Markets were like a shell game last week. While shifting gears, did Markets give us any queues about what is next?


Markets climbed on Monday despite starting the day in negative territory. Monday was the start of bond offerings to pay for the unprecedented stimulus provided by the US government. The offerings were well received with T-Bills showing only .02% increase in rate while 3-year notes actually fell in rate.


Markets were up most of the day on data that supported the move as CPI data fell to 1.4% in April from 2.1% in March. Additionally, Oil inventories came in lower than expected. However, as the day wore on, markets slipped into the red as Dr. Fauci’s senate testimony raised concerns of a prolonged virus period. Also, President Trump applied new pressure on the Federal Reserve to explore negative interest rates. If Europe and Japan’s venture into negative rates has been any indication, the marginal benefit would not be worth the battle to free us from a negative rate environment and return to strong growth after the recession.


Federal Reserve Chair Powell spoke, and the markets listened. He expressed the likelihood of an extended period of economic downturn for the US economy. Meanwhile crude inventories fell, showing some promise in potential storage capacity relief. Markets fell on the day as a $3T bill proposed by congressional democrats was viewed as unlikely to clear senate opposition.


Markets started the day in the red as Dr. Bright’s testimony before the senate featured the statement “Darkest winter in history” was coming. An indictment on the preparedness of the US when it comes to COVID-19. As the day progressed the markets climbed out of the hole, led by falling initial jobless claims (2.98M). Also, there were rumors that President Trump may be in favor of an additional round of stimulus.


Friday was much like Thursday as dismal April retail sales caused markets to open in the red. As the day continued, markets found a way to claw their way back into the green. This is a telling behavior for investor psychology. Bearish activity would be to not hold the market into the weekend. Mostly this occurs out of fear of what negative information the weekend news cycle could bring.


Markets were down a little over 2% for the week, with most of the damage being done on Tuesday and Wednesday. There were several reversals of course this last week, in either direction. The economic data was harsh, and some additional fears were raised by the scientific community. Friday’s climb into the green after a rough week was encouraging for what may come.

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