For the week ending on May 16
The Future is Uncertain
When the Chairman of the Federal Reserve, Jerome Powell, comments that “the path ahead is both highly uncertain and subject to significant downside risks,” it make sense that the markets would trade lower for the week. And while his comments were not all doom and gloom, he was explicit that the path ahead is very unclear.
Adding to Powell’s comments on the future, Dr. Fauci also weighed in with a cautious tone about the states‘ reopening plans – and while realistic, these comments were unhelpful to moving markets higher.
Then we come to the numbers and hard economic data. We saw renewed concerns about virus outbreaks in China, Germany and South Korea. We witnessed U.S. unemployment numbers soar. We cringed at terrible retail sales numbers (see below for Term of the Week). And we were stunned with a report that mortgage delinquencies could exceed levels seen during the Great Recession in 2008. Lastly, worries about increasing tensions between the U.S. and China mounted.
Despite all of the negativity, one positive piece of economic data from Friday seemed to slightly offset some of the week’s market declines – The University of Michigan’s consumer sentiment index unexpectedly improved. Why? The CARES relief checks helped consumers’ wallets, and combined with discounted pricing, consumers apparently felt better in May than they did in April. Perhaps we will also hear of more stimulus plans from Congress next week?