Market Optimism is SKY HIGH!

An amazing 2.5 Million Jobs were added back in May, according to last Friday’s ADP employment report.  The crazy part is: economists estimated we’d have a LOSS of over 8 Million Jobs.  Certainly, shows that no one can accurately predict the data, except those that guess correctly.

A combination of Federal Reserve Monetary Support, Government Fiscal Support and a lot of pent up demand are making investors very optimistic that Covid-19 will be a temporary obstacle and we’ll be back to an expanding economy much sooner than later.

The feeling is that if Covid-19 becomes worse, the Federal Reserve and our Government will step in to provide more monetary support for the economy and markets.   This is leaving many with a win-win attitude.  No matter what happens, Stocks will continue to move higher.  Appears to be right for now!

Last week, the markets were off to the races as we are seeing the likes of the beaten-up airlines, cruise lines and other similar industry stocks come off extreme lows.  This does make senses as these companies practically went to zero revenue and we know that’s going to increase quickly.  Anything from 0 looks large!

The Dow rose 6.8%, the S&P 500 4.9%, the Nasdaq Composite 3.4% and the Russell 2000 Small Cap up 8.13%.  Out of our 10 S&P 500 sectors, 3 are now positive for the year.  Information Technology, Consumer Discretionary and Consumer Services.  Out of the 7 that are negative, the significant laggard not surprisingly is Energy.  Worth noting that energy is up over 14% so far in June.

Over the pond the developed market EAFE stock index rose 7.07% and the Emerging Market Stock Index 7.88%.

Bond Yields Rise

The 10 Year US Treasury yield rose 25 basis points to end last week with a yield of .90%.  Even with the Federal Reserve purchasing Government Bonds, this yield has room to rise if the economy is truly going to recover quickly.

The Barclay’s Aggregate Bond Index retreated (.49%) last week however is up 4.95% year to date.

High Yield and Corporate Investment Grade debt rose last week, and now on the verge of recovering much of the downside pressure experienced in March and April.  This type of debt typically is not as interest-rate sensitive as US Treasuries, however are impacted by economic and company performance.  Keep in mind that debt (bonds) are the highest in-line to get paid if a company goes bankrupt, potentially adding additional security.

People on The Move

Over the past couple of weeks, I can’t help to notice that driving around is becoming more normal.  I drive 4.2 miles each way to work, mostly on Route 295 as I enter from exit 36.  The drive had been so uneventful and relaxing, however that’s now in the rear view mirror as people are out and about.

The weekend of May 30th, Michelle and I took a ride to Washington Crossing State Park.  I haven’t been there since I was a kid!  It was wonderful parking the car, taking a long walk along the river saying hello to people and just enjoying nature.  Everyone was practicing social distancing and everyone seemed relaxed.

This week in New Jersey we’re supposed to hear of additional openings, specifically for gyms, public pools and restaurants.  I’m sure you want to go out to your favorite restaurant however it’s completely understandable to be reluctant…

We made reservations to a restaurant in Pennsylvania, far outside of Philly, for next Saturday evening.  Apparently, it’s outside dining.  I’m sure we’ll judge whether to enter and stay once we arrive and see the set up.  I’m definitely reluctant however I really want to get out, like most.

Please do exercise caution as you go forward.  If something doesn’t seem right, trust your instincts as there is always tomorrow if you make good decisions.

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