May 10, 2020 Weekend Market Thoughts by Matt Somberg

Sunday May 10, 2020

 

Dear Friend,

Happy Mother’s Day!  We hope all of you had a great day today celebrating with or thinking of the mothers in your lives.

As has been customary over the last eleven weeks, we share a few thoughts with you this Sunday evening.

Last week

  • The Dow Jones Index gained 2.6% and is now down 14.8% since January 1st
  • The S&P 500 gained 3.5% and is now down 9.3% since January 1st
  • The NASDAQ gained 6% on the week and is now positive 1.7% since January 1st

If we take a longer-term view and compare the markets today to where they were 12 months ago, the returns have been:

  • Dow -6.21% over the last 12 months
  • S&P +1.68% over the last 12 months
  • NASDAQ +15.2% over the last 12 months 

Despite an exhausting first four months of 2020, the major indices are all within a very normal year-to-date performance range. The NASDAQ is certainly the outlier when we compare its returns to that of the S&P 500 and the Dow Jones. This is because the index is comprised of many technology companies that have seen their business grow due to Covid-19, and will likely continue to benefit from our reshaped economy post-Covid-19.

Unemployment

There was no surprise when the April unemployment numbers were announced last Friday. The data showed 20.5 million jobs lost in April, which is 14.7% of the working population. Including the unemployment numbers from March, over 30 million Americans are unemployed. The weekly claims number peaked at 6.9 million during the week of March 28th. Claims have slowly declined each week, and last week the claims number was 3.1 million. Interestingly, the unemployment numbers and the number of positive Covid-19 cases work the same way. The data is staggering, but the numbers are moving in the right direction each week. Weekly unemployment claims continue to be the most important economic data point to follow.

A few additional observations:

1)     35% of minimum wage earners are now unemployed

2)     The industries hit the hardest are the leisure and hospitality industries, as expected. Airlines, cruise lines, hotels and restaurants are businesses that involve close human interaction. Until we get back to normal – likely by way of a vaccine – these industries will continue to face disruption due to modified consumer behavior.

3)     While not a large proportion of the workforce nor unemployment figures, the over-60 demographic is responsible for 20% of the business that airlines, hotels, cruise lines, and restaurants receive. The 60+ demographic is also the most vulnerable to Covid-19 and is unlikely to return to pre-Covid-19 consumer behavior until a vaccine exists.

The Week Ahead

It will be another busy week for corporate earnings with Marriott, Toyota, and Sony reporting, while Ford and UPS are among other major companies holding annual shareholder meetings. Thursday will again bring the weekly job loss numbers. The trend from the past 4 weeks indicates a jobless claim number of between 2 million and 3 million.

On Wednesday, Federal Reserve Chairman Jerome Powell will speak to Congress regarding the Fed’s view for the economy.

We hope you have a safe and healthy week!

Sincerely,
Matt

 

Matthew A. Somberg, AIF®
Accredited Investment Fiduciary®
Co- Founder and Principal

 

Source: Barron’s Magazine