What a week in the markets and the world. Though tension rose across most cities in the US, equities rallied in a big way, with the Russell 2000 clocking an 8.12% gain for the week, only to be bested by Emerging Markets equities. For the first time, in what seems like ages, the Nasdaq and its tech / healthcare constituents lagged significantly.
This makes sense if you look sector performance for the week.
Energy, Industrials and Financials ran wild, while Healthcare lagged significantly. A lot of this could be driven by some mean reversion in performance, as when you look at YTD numbers Tech stocks are still drubbing other sectors, outperforming Energy stocks by 45% so far this year.
Small Caps, Value stocks and Dividend stocks led the way for the week, which is in line with the sector information above.
The obvious, big driver, this week was the surprise jobs data released Friday. While markets expected to see more job losses due to the ongoing quarantines, we instead saw the creation of 2.5 million jobs. Initial market reactions were primary disbelief and even questions as to whether the numbers had been fudged (they have not). But, if you think about it a little longer, the rise in jobs is not exactly unexpected or that extraordinary. Over the past few months each jobs report has been more extreme and more unprecedented than the last, to the point where the April ADP jobs report showed 20 million lost jobs during the month. 20 Million, that mean just about 13% of all working Americans lost their jobs in April.
So, as economies have started to open up, we’d better darn hope that some of these jobs are coming back. When you look at the chart above, it’s quite clear that though Friday’s number was a shocker, it barely made a dent in the huge hole the US economy is in. So, I’ll go along with the joy surrounding the report, but with a cautious eye towards the future. Remember it took almost a decade for the jobs lost in the GFC to fully come back. With some of the potential structural economic changes being talked about surround Covid19 (and here), there is an argument to be made that a lot of these lost jobs may not ever come back, and that’s pretty scary.
What’s Coming this Week
Monday sees Stitch Fix ($SFIX), which recently announced major cutbacks, report earnings. No economic releases.
On Tuesday we get a luxury goods trifecta with Tiffany ($TIF), Signet Jewelers ($SIG) and Movado ($MOV) all reporting. We’ll get to see how the global pandemic treated them :).
Wednesday has the first major economic data item with the Consumer Price Index as well as a statement from the Fed. On the earnings side United Natural Foods ($UNFI) reports, which could be an interesting call.
On Thursday, we’ll get to see Initial Jobless Claims, always an adventure in our Covid19 times.
Friday, nothing much. Hopefully some people have remained employed and we haven’t burned down the country yet.
What We’ve Been Reading
Are we looking at a lost decade
Remember, crazy moves in the market are pretty common
Don’t worry (I know you are worried) corporate ski resorts seem to be doing just fine
Looking at the performance of equal vs cap weighted indexes
Microsoft trying to go carbon negative
Have a great week!
Nathan
