Markets, Economy

Weekly Kickstart (04/13/2020-04/17/2020)

4/13/20 8:00 AM

iStock-626627280.jpgThe market rebound resumed last week, as the S&P 500 jumped by 12.10 percent to 2,789.82. That was the largest gain since 1974 and enough to cut the benchmark index’s 2020-to-date loss to just 13.65 percent (versus -30.75 percent on March 23). A combination of the green shoots outlined in the prior Kickstart and additional signs that the efforts to curtail the COVID-19 outbreak are working helped drive last week’s short squeeze. On Wednesday the S&P 500 even managed to enter a new bull market (at least 20 percent above the recent low). If these gains hold that would make the bear market we are exiting the shortest in history, arguably appropriate since the 20 percent decline from the high was the quickest on record, but the bounce is probably still a bit overdone in the near-term as well. Perhaps a more timely statistic is that in the previous ten bull markets, the average gains were quite modest during the 60 days immediately after the 20 percent threshold was first met.

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A similar occurrence here would not be surprising where aggressive bulls and bears both wind up being disappointed as equities instead chop around in a (relatively wide) range until there is more certainty that the spread of the coronavirus is under control. Moreover, it is still far too early to say that the COVID-19 contagion has peaked, that the market has bottomed, or make some other confident claim about what is going to happen over the next few months. Fortunately, most 401(k) investors do not have to make such short-term predictions because they are instead focused on the long-term objective of preparing for retirement through many years of routine, tax-advantaged plan contributions. It can understandably be difficult to stay so resolute while markets experience volatility similar to what occurred in March, but as we have pointed out on the blog and recent price action has again demonstrated, some of the sharpest rallies often occur in close proximity to the most severe selloffs. Put simply, during periods of extreme volatility, doing nothing can often outperform trying to time the market. Of course none of this means that staying invested is an optimal strategy for everyone, and perhaps a more prudent course of action for some will be to use this latest run up in stock prices as an opportunity to work with a professional financial advisor and make sure that their positioning is properly aligned with their risk tolerance, nearness to retirement, and other unique variables. As always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last (holiday-shortened) week, the positives included that household and wholesale inflation pressure remained muted, and JOLTS data confirmed the labor market was on a solid footing ahead of the COVID-19 disruptions. As for the negatives, home-purchase applications fell, credit utilization jumped, small business owner optimism collapsed, consumer confidence plunged, and the number of Americans making first-time claims for unemployment benefits continued to rise at an unprecedented rate as the lockdown protocols remained in effect. This week the pace of economic data slows down but there are still a few important reports on manufacturing, housing, and consumers scheduled to be released.

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What To Watch:

Monday

  • Nothing scheduled

Tuesday

Wednesday

Thursday

Friday

 

 

Sources: Econoday, FRBSL

Post author: Charles Couch

Disclosures