The Weekly Update
Week of March 30th, 2020
By Christopher T. Much, CFP®, AIF®
An open-ended commitment by the Federal Reserve to support American businesses and capital markets along with the passage of a $2 trillion aid package improved investor sentiment and drove a strong rally in stock prices.
The Dow Jones Industrial Average jumped 12.84%, while the Standard & Poor’s 500 gained 10.26%. The Nasdaq Composite index rose 9.05% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, increased by 12.03%.
Stocks Rebound
A stunning string of Federal Reserve initiatives and the passage of a $2 trillion aid bill buoyed stocks this week, with the Dow Jones Industrial Average jumping by over 11% on Tuesday, its best day since 1933. Stocks continued to strengthen the following day, registering their first back-to-back gains since February.
Despite a record 3.28 million jobless claims, stocks added to their gains for a third straight day. Stocks gave back some gains on the final day of trading to end an otherwise welcomed week of positive price action.
A Shift in the Conversation
The conversation around the domestic spread of the coronavirus has been centered on “flattening the curve,” with closures of local businesses and schools, a shift to working from home, and appeals for social distancing.
Hitting the pause button on the U.S. economy, however, has had its consequences, including massive job losses, sharp declines in business revenues, and disarray in the capital markets. This week the conversation shifted to include how to restart the economy amid a pandemic that may not have yet peaked.
Final Thought
On a strictly definitional basis, the three-day surge in stock indices this week signaled a new bull market (when stocks rise 20% after having fallen 20% or more). But it’s hard for even professional investors to make sense of a market that enters a bear market and a bull market in the same month. This volatility certainly speaks to the deep health and economic uncertainties that exist.
It’s not clear what the rally this past week means for the market going forward. Absent such clarity, markets are likely to remain volatile in the near term, requiring investors to be patient with their long-term investments and wait as calmly as possible for time to answer the big questions overhanging today’s market.
THE WEEK AHEAD: KEY ECONOMIC DATA
Tuesday: Consumer Confidence.
Wednesday: Automated Data Processing (ADP) Employment Report. Purchasing Managers Index (PMI): Manufacturing Index. Institute for Supply Management (ISM) Manufacturing Index.
Thursday: Jobless Claims for Unemployment. Factory Orders.
Friday: Employment Situation Report. Purchasing Managers Index (PMI): Services Index.
Source: Econoday, March 27, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.
THE WEEK AHEAD: COMPANIES REPORTING EARNINGS
Tuesday: Conagra Brands (CAG), McCormick & Co. (MKC)
Thursday: Walgreens Boots (WBA), Chewy (CHWY)
Friday: Constellation Brands (STZ)
Source: Zacks, March 27, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.
