Markets continued their climb back last week. In fact, the tech-heavy Nasdaq is now in positive territory for 2020 closing the week with a year-to-date gain of 1.66%. Amazing as the biggest news last week was how the last 10 years worth of job gains were wiped out in one month.
The unemployment rate of 14.7% far exceeds the previous record of 10.8% set in 1948 but is still well below the 25% economist estimate the U.S. saw during the Great Depression. So, why did the market rally? In short, investors believe the worst is over and are anxiously looking forward to the rebound. This, as states are making plans to reboot their economies. Even hard-hit New York has begun developing a plan to get businesses moving again.
Many analysts believe their is a disconnect between investor expectations and reality. They point to recent data showing that while there are signs of a slight pickup in gasoline demand and traffic in restaurants, many companies will continue to struggle for months. Their main concern is; what if an uptick in new cases returns?
One analyst noted, “The whole market is not up.” Just five of the biggest tech companies, Microsoft, Apple, Amazon, Alphabet (parent of Google) and Facebook make up about 20% of the S&P 500. They are the ones that have benefited the most from Americans sheltering at home.
Investors also focused on a report last Friday. The report said trade negotiators for the U.S. and China spoke on the phone pledging to create favorable conditions for their phase-one trade deal.
Seeing the market this strong is a welcomed sign for all investors. Especially after the last few months we’ve all experienced. Be safe.