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Fireside Charts: Equities Rise As Unemployment Hits New Highs... What's Driving the Rally?

By:BCM Investment Team | Date:May11, 2020 | Category: Equity, Economics, Market Highlights, Fireside Charts

The U.S. unemployment rate clocked in at a disastrous 14.7% on Friday, hitting its highest point since the Depression. If that wasn't bad enough, the report shows that the U.S. lost more than twice as many jobs as we did during the Great Recession... in approximately 1/12 of the time. And not included in that 14.7%? The record number of people who left the labor force altogether! And now that we've set the scene, here comes the paradox: also on Friday, the Dow Jones Industrial Average (DJIA), S&P 500® Index, and Nasdaq-100 Index all rose more than 1.5%. So what gives? A market overweight to (the thus far resilient) Big Tech? The Technology and Communication Services sectors have both hit new highs recently, and are large enough to pull the rest of the market along with them. Effective fiscal and monetary intervention? Possibly, the Fed has gone on a massive shopping spree that's doubled its balance sheet and a $2 trillion stimulus package is nothing to sneeze at. Or is it all down to irrational investors? We'll have to wait and see. One thing's for sure though; the COVID-19 threat is far from over. Global cases are still on the rise, and may continue to climb as reopening economies provide more opportunity for spread. Wuhan just reported its first new cluster since emerging from lockdown in early April... could that be a glimpse into our future as states begin lifting restrictions and returning to work?



1. As many states start to reopen, the grim facts are still with us: U.S. unemployment hovers at ~15%...


Source: WSJ Daily Shot, from 5/11/20



2. Here is a comparison to the Great Recession...


Source: WSJ Daily Shot, from 5/11/20



3. Even more sobering, the previous chart does not include the ~9.5 million who simply left the labor force:


Source: WSJ Daily Shot, from 5/11/20



4. Do earnings, unemployment and GDP contraction no longer matter for stocks? We understand forward-looking, but is the rally ahead of itself?


Source: WSJ Daily Shot, from 5/11/20



5. While the S&P 500 was up 3.5% for the week, only two sectors, Technology and Communication Services, made new recent highs...


Source: The Chart Store, as of 5/8/20



6. Despite some recent signs of life, small and mid-caps are still lagging...


Source: The Chart Store, as of 5/8/20



7. Remember the Fed? They have almost doubled their balance sheet and have purchased many of the bonds at the longer end of the curve...


Source: The Chart Store, as of 5/6/20



8. A reminder from The W.H.O. that this is far from over...


Source: WSJ Daily Shot, from 5/11/20



9. Here are new confirmed cases visually:


Source: WSJ Daily Shot, from 5/11/20



10. Quarantine realizations:


4.22 - meetings emails new yorker

Source: WSJ Daily Shot, from 5/7/20




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Disclosure: The charts and info-graphics contained in this blog are typically based on data obtained from 3rd parties and are believed to be accurate. The commentary included is the opinion of the author and subject to change at any time. Any reference to specific securities or investments are for illustrative purposes only and are not intended as investment advice nor are a recommendation to take any action. Individual securities mentioned may be held in client accounts.