What a difference 1 week can make! Prior to last week, stock markets were pricing extreme optimism, in my opinion. Last week optimism quickly retreated, at least for now, as the Dow Jones retreated (5.51%), the S&P (4.73%), and the Nasdaq Composite (2.27%). The Russell 2000 Small Cap index led the decline by falling (7.89%) for the week.
Internationally, the MSCI International EAFE Stock Index was down (4.21%) and the Emerging Market Stock Index was off (1.52%).
The Barclay Aggregate Bond Index rose as expected, increased .72%. The 10 year US Treasury ended the week yielding .70%, very close to the yield on March 31, 2020, @ .69%. Keep in mind March 31st was near the current year to date low on the S&P 500, and extreme panic was in the air.
So WHY the market retreat last week? Perhaps several reasons! One can argue the market has recovered too fast without really seeing any significant economic data that suggests the recovery will be very smooth. There will be some collateral damage. We are seeing an uptick in new cases and hospitalizations. I believe this is to be expected with the combination of an increase in testing, and the re-opening of America that has occurred. Another may be last week’s Federal Reserve GDP Outlook. And of course, the media. I’ll resist discussing the media influence for now, as it really bothers me.
Fed Forecast Disappoints the Market
Last week, Jerome Powell enlightened us with the Fed’s Gross Domestic Product (GDP) outlook. This really shouldn’t have been a shock, however it did rock the markets. The Fed sees US 2020 GDP falling (6.5%), rebounding to a plus 5% in 2021. What do you expect when the largest economy in the world closes for 3 months plus?!
On the other side, keep in mind, between the Federal Reserve, Fiscal Stimulus, and most importantly, Natural Human Desire, the economy and thus the markets should both move forward in time, as we work through the challenges.
Wow, talk about amazing weather! Saturday and Sunday in Southern New Jersey was gorgeous! I certainly hope you were able to enjoy the sunshine, whether sitting outside at your home or venturing out cautiously.
Michelle and I went to a seafood restaurant in Bristol, PA. Tables were set up outside on the wide sidewalk, with significant distance in-between. The restaurant staff all wore masks and gloves and obviously, very well prepared. All 18 tables were full at 7:00 and I must say, everything felt very comfortable and we had a wonderful evening. It was a pleasure to drink a nice bottle of wine, sitting outside, gorgeous weather and company! For a couple hours, I felt normal.
Now, back to work!!!
Seminars to Start in September, we hope!
Yes, I’m being a bit optimistic as we’ve scheduled 3 seminar dates beginning in September to be held at the Woodcrest Country Club. Visit our Workshop Page for all updates!