Consumption is King
Last week the stock market saw the greatest 50-day rally in the history of the S&P 500. I repeat, the greatest 50-day rally of ALL-TIME. This happened during the worst pandemic to hit our country in 100 years, unemployment numbers skyrocketing to Great Depression era levels and riots happening throughout the country. Which makes for a good reminder that the Stock Market ≠ the Economy.
Whether this was too much too soon will largely depend on whether the American Consumer resumes spending their hard-earned money. In April the US personal savings rate went up to 33%, from its averages around 7-8%, caused by uncertainty surrounding the future course of the pandemic. 10% of the jobs that were lost because of the Coronavirus have come back in May, quite a feat given how many were lost. However, both point toward how far we still have to go.
Don’t be surprised if this gap between the Stock Market and the Economy continues to grow. It will be interesting to see how the markets react to what will probably be a negative corporate earnings season coupled with a disastrous 2nd quarter GDP report.
As the pendulum shifts, we find this post-recovery timeframe to be ideal for rebalancing the portfolios and re-assessing the risks that you are taking in your investments. It would be pure speculation to say that the stock traders who define our market movements are being a bit too optimistic about the very long recovery we are facing but prudent to be prepared for a less than perfect path from here.
Register for June 16th’s Webinar with the RIA Institute as SGH’s Sam Huszczo Moderates a Panel Discussion on Passive vs Active Investment Management in a Bear Market in the 1st link below: