The Uptick Market Evaluation – The Battle of Optimism vs Realism
MARKETS – Week ending April 17
The battle of optimism vs realism
In the battle of optimism vs realism, this week, optimism won. The markets again shook off grim economic data and instead focused on the roadmap for reopening the economy. Three quick economic takeaways:
- More of us filed for unemployment benefits: Claims hit a staggering 22 million in the past four weeks. This means that in four weeks, all of the jobs added to payrolls for the past 11 years were wiped out (at least temporarily).
- We are not shopping for anything other than necessities: Retail sales plunged 8.7% last month (with clothing/accessories down 50%). There were only a few categories showing positive signs, like grocery sales.
- Factories are not producing much: U.S. manufacturing production, which accounts for 11% of the U.S. economy, dropped significantly in March – its biggest monthly drop since 1946.
- We are not building new homes: No surprise here, but U.S. home construction fell over 22% in March, the worst monthly decline since the 1980s.
But the markets instead are looking past this data. Investors are focusing on all of the positive news in the fight against coronavirus – signs that the curve is bending; the strategy for reopening; the report that Gilead Sciences’ (ticker: GILD) drug Remdesivir could treat Covid-19 effectively; the potential for a vaccine with the first U.S. clinical trial underway.
This is now the second week in a row that the market is up, and indexes are up significantly from hitting 52 weeks lows on March 23.
Since the lows, all three major indexes are up around 30%!