As we know well by now, the financial markets have recovered nicely from the initial wave of the coronavirus, at least until recently. After plunging by a third from its February 19 all-time high through its March 23 bottom, the S&P 500 has rebounded sharply, although it still remains about 10% below its record high. NASDAQ, however, has won back all of what it lost and now is solidly in the green for the year. Bond yields, meanwhile, have largely settled into a relatively narrow range, all of which signals that investors are fairly positive about the future.
Certainly, the most recent economic news has borne out that optimism. Retail sales jumped a record 17.7% in May after plunging 14.7% in April, the first increase in fourth months. Moreover, May sales in dollars were only 7.7% below where they were in February before the worst effects of the virus hit. In other words, after an extraordinary dip, spending is already close to where it was as more stores and restaurants reopen.
Elsewhere, the Conference Board’s index rose a better than expected 2.8% in May after falling 6.1% in April. Sales of newly-built homes jumped 16.6% while the National Association of Home Builders’ confidence index surged 21 points in June to 58. Sales of existing-home sales, by far the largest category, dropped nearly 10% in May, but that “reflected contract signings in March and April, during the strictest times of the pandemic lockdown,” the National Association of Realtors said, adding that “home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”
While all of that is undoubtedly good news, is it sustainable? Right now, two main questions are facing the economy and the financial markets: How bad will a dreaded “second wave” of the virus be on both the nation’s health and economy and what happens now that the U.S. government’s stimulus programs have started to run out? Continue reading "Are We Ready For A Second Wave?"