D&D Note (5.8.2020) ~ Markets Continue to Rally Despite 20.5 Million Jobs Lost in April ~
Markets are clearly not phased by historic jobless numbers. 20.5 million jobs lost in April with the unemployment rate jumping to 14.7%.
Right now the market is pricing in transitory joblessness. But the jury is still out on how temporary these job losses will be and just how deep and long the recession will be.
How soon do restaurants and retail store get back to full capacity? Some of these jobs are not going to be coming back until there is a vaccine.
It would seem that a 2nd wave of Covid-19 has not been factored into the market.
Wall Street has become decoupled from Main Street and the divergence has too narrow. Either things get better and economic activity picks up to reflect current market. Or things don’t get better and the market starts to reflect the negative economic activity.
DOW up 1.91%
S&P 500 up 1.69% (2929.80)
NASDAQ up 1.58%
VIX down -11.01% dropping into a 20 handle of 27.98
Oil up 4.59% to 24.63 a barrel.
The next couple weeks is the waiting period to see if easing lockdowns causes a 2nd wave. Or does social distancing continue while economies are reopen and virus cases stay down.
This is still just the short term. There is a high probability we will get a 2nd wave this fall during flu season, if not another wave this summer as well.
~ Dave James / Principal Trader and Market Strategist