Stocks Had Best Week in 45 Years
If there’s one thing we know about the stock market, it’s that you never can tell what’s coming next.
The last 2 months have been a prime example. The Dow had plummeted by 37.1% from its February 12 high of 29,551 to a March 23 low of 18,592. But then – surprise! By April 9th it had rebounded 29% to recover 50% of its loss. The rise included a pre-Easter four-day week, April 6–9, when the Dow rose 12.7% to record its best-performing week since 1974.
This may perplex you, given continuing economic woes. Set back in 1982, the record for weekly first-time unemployment claims was 700,000. But during the week ending April 9th there were 6.6 million of the same. Consumer confidence is at a 9-year low. Some are projecting second quarter unemployment rates exceeding 20%, and GDP declines of 40%.
These are crazy-bad numbers. So, why did the market rebound? Because, while the economy is driven by here-and-now numbers, current stock prices are set by future expectations. After all, an investor wants to buy low today, and sell high in the future.
On what forward-looking optimism did the recent rally pin its hopes? I see at least four things that need to go right to achieve a real recovery. We need to:
1. Receive massive Federal financial support. You can check off this box. Funds are beginning to flow pretty freely to individuals and business, large and small.
2. Flatten the COVID-19 curve. It’s a little early to tell, but this box also appears to be checked.
3. Re-open the economy safely and quickly. This will be tricky, but plans seem underway.
4. Keep inflation in check. The Federal government will need to recapture a lot the fuel (cash) it’s thrown on the economic fire to keep it stoked.
It will be interesting to see how all this plays out. However and whenever it does, I do firmly believe the economic and business worlds will eventually regain their footing. And in exchange, our stock markets will reach new highs to continue their upward trendline.
John A. Frisch, CPA/PFS, CFP®, AIF®, PPC™ founded Alliant Wealth Advisors in 1995 and has over 30 years of experience as a financial professional. In his free time, he’s an avid long-distance runner, a sport that requires discipline, patience and vision. John applies these same skills to his professional pursuits: He helps families and retirement plan sponsors adopt a patient, disciplined approach to overcoming financial challenges and reaching their distant goals along a clear path. Learn more at www.alliantwealth.com.