Change Happens Swiftly

The overall market can be overly simplified into three categories:

1. Rich (overvalued)
2. Fair (properly valued), or
3. Cheap (undervalued)

While there is a lot of uncertainty in the world right now this also represents opportunity. Now, no one will ever know when we are going to hit a bottom and even if you were able to perfectly time the bottom that doesn’t guaranty that there is going to be enough liquidity to buy what you want at that point in time.

Equities Skid as Viral Economic Fears Mount

U.S. equity markets skidded last week with the Dow Jones Industrial Average suffering its biggest weekly point-loss on record amid escalating concerns the COVID-19 pandemic will cause a global recession. The good news is the Federal Reserve is virtually all-in with unlimited additional quantitative easing measures with daily purchases all this current week, while Congress is nearing an unprecedented nearly $2 trillion stimulus package. Also positive, the IRS extended the 2019 tax filing date to July 15.

Weekly Performance

For the week, the Dow Industrials plunged 17.30%, the S&P 500 lost 14.95%, and the tech-heavy Nasdaq Composite sank 12.62%. On Friday, the Dow ended below 20,000 for the first time in three years, down nearly 10,000 points since its mid-February all-time high.

Technology Falls the Least

All 11 major sector groups ended the week sharply lower with Real Estate (-22.92%), Energy (-19.63%), and Industrials (-18.38%) down the most. Consumer Staples (-11.17%),  Communication Services  (-12.25%),  and  Consumer  Discretionary (-12.50%) lost the least.

Market Watch

Chart of the Week: Surge in Layoffs Expected

We anticipate a large surge of jobless claims in this week’s unemployment claims report. Looking at Google search data, there was a massive spike in Google search interest for “unemployment benefits” last week. Several major industries including tourism, restaurants, and services are expected to experience significant layoffs in the coming weeks. Economic data will weaken and this week's jobless claims data will be a preview. This is widely expected though and markets have priced in a lot of bad data already.