Last week was quite a week in the markets. Between a pessimistic outlook from the Federal Reserve and increasing fears around COVID cases increasing globally, we had a significant rise in volatility. We also had the latest unemployment information released which continues to paint a troubling picture in the jobs market.
On the market, the S&P 500 was down 4.82% for the week, the worst week in the market since March.
The market was generally steady heading into Wednesday, however, following the Federal Reserve Open Market Committee meeting, Chairman Powell painted a pretty negative view on how quickly they believe the economy will recover from the shutdown.
In addition, there were renewed concerns around COVID cases increasing globally which added to the volatility we saw on Thursday. While this week the market has started out moving up, in my opinion, it does appear that volatility is here to stay as we seesaw back and forth from positive news coming off the lows from the shutdown to negative news on the pace of the re-opening or concerns around COIVD.
In economic news, new claims for unemployment came in around 1.5 million. While this is the lowest we have seen since this crisis began, it is still very high historically and shows that the job market has not fully repaired itself yet.
Ongoing claims came in at around 21 million which was pretty close to flat compared the week prior. This is the number to pay closer attention to as this shows those that continue to stay on unemployment benefits for an extended period of time. We are likely to continue to see this number improve in the coming months.
Based on the outlook from the Fed, they do not expect the economy to get back to previous levels until at least 2022 which will challenge the job market during that time.
Bottom Line – we believe that volatility is here to stay for the foreseeable future. I believe we will have very good weeks as we get positive data on a month over month basis as we recover from the shock to the economy from the shut downs. However, when you compare that data on a year over year basis, we may still see that the economy is not in as sharp of a V shaped recovery that many are hoping for. We also have a lot to work through in the coming months with CARES Act funds ended between June and July, corporate earnings releases in July and the upcoming election season. We are focused on remaining patient to see how all of this plays out.