A couple of weeks back, we commented on how the markets can move forward seemingly in contradiction to being surrounded by bad economic news. The simple answer is found in these two things: the fact that the news that arrived was not as bad as what was promised and that the markets are more of an expression six months into the future than they are a snapshot of today. Thank goodness.

In April, the US labor market collapsed. If you think that is an extreme statement, take note that the figures show an unemployment rate of 14.7%, the highest since 1939. The headlines shout “Two Decades of Job Creation Lost”. Indeed, more than 20 million jobs have been shed. But, although it may be hard to believe, the situation is actually not as bad as many forecasts had predicted. For example, the unemployment rate was projected to be 18%. Many financial news outlets reported job loss totals inaccurately (achieved by adding up the weekly totals of those filing for unemployment benefits but not adding back the numbers for those returning to work).

Further, the weekly rate of losses has been improving. And, there’s a bit of news I found especially bright; a CNBC survey included a question directed to those who have suffered a job loss due to the economic shutdown. It asked “Do you expect to return to work at your old employer after the Covid crisis is over?” 85% said they had high confidence they would return. 6% said “Probably not” and 9% replied “Definitely not’.  I wonder how many of the 9% are those getting paid more for not working then they were earning at a job. All in all, it is very heartening to see such a high percentage fully expecting to return to work. Another interesting bright spot comes from Royal Caribbean Cruise Lines who report that bookings for 2021 are running back at pre-crisis levels. If folks are good with getting on a cruise ship, I image that bodes well for restaurants too.

On another subject, today is the 75th anniversary of VE-Day, the end of the European part of WWII. On this day in 1945 nearly all Americans were united in a common understanding of ‘victory’. We stood shoulder to shoulder cherishing freedom — freedom for ourselves and also for those afar who we helped liberate from oppression and tyranny. Today we face a different kind of enemy. It is here on our lands, our cities and our homes. We are not united in how to fight it and that may be its biggest threat of harm. At some point, the Covid19 crisis will be over and I’m pretty sure that life will return to normal. Arguments over when that can be have the perverse effect of delaying that day.

Ron’s Market Minute – My Perspective on this week… and the Current Crisis

The past five days would have felt to me like a very lively group of trading sessions in days (or perhaps years) gone by, but after the incredible swings we’ve seen since the end of February, the past few days have felt relatively tame. It appears that the standout headlines with conflicting information concerning progress vs. the virus and then possible movement toward happier vs. more drastic outcomes in the months ahead are causing a (refreshing) bit of fatigue. Looks like we’re beginning to understand that the worst possible outcomes are being replaced with some semblance of balance and we’re also coming to grasp just how big the job the opening and rebuilding of US and world economies will be. 

With that in mind, it appears that 3000 on the S&P Index* is looking more and more like a place that the Index may be ‘stuck’ for a while as we digest the recent upward pop. A move by the Index decisively upward past 3000 will give me confidence that we might be at the start of another upward move, rather than looking for a retest of the March lows as so many pundits are predicting.  

And while I’m looking at the ‘half-full’ glass, I had occasion to visit with one of the lead managers of a large mutual fund group this past week, and he had a few words of wisdom that I’d like to pass on to you. 

Chris- Any idea where the markets will be in a month?

Me- None whatsoever!

Chris- How about in one year?

Me- I’d guess higher than today but without a firm conviction.

Chris- What about in 5 years?

Me- Decidedly HIGHER! With Firm Conviction!

Chris- Then invest with the 5-year horizon in mind!

Let me suggest that if your answer to the ‘5-year’ question is the same as mine, you might share that thought with your families- a bit of positive outlook could be a good thing for them, too.

Enjoy your home-time with your family, and Have a good weekend!

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

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