Unemployment, Unbothered Equities, and the Uncertain Path Forward

t’s jobs report day and we hate to break it to you, but the situation is… grim. The U.S. Bureau of Labor Statistics released its monthly Employment Situation Summary this morning and highlights include 20.5 million jobs lost in April, the highest unemployment rate since the Great Depression (14.7%), and a “real” unemployment rate (which includes the underemployed and workers not actively seeking jobs) of 22.8%. New applications for unemployment benefits are trending downward, but could that trend reverse as depressed activity forces small businesses to burn through their cash reserves? Equities don’t seem too perturbed by the news though, and the market recovery rages on. The Nasdaq has even inched into positive territory for the year! Markets, as always, are a forward looking mechanism; could this indicate that investors are feeling bullish on a late-2020 economic recovery? The S&P 500^® Index looks likely to remain expensive over the coming months—with analysts pegging the forward P/E ratio at ~21%—but we’re taking the number with a grain of salt given how many companies have pulled their earnings guidance, and eyeing how much of that number is attributable to just six companies. Fund flow trends, the trade war, and the reopening of the economy have also offered some food for thought heading into the weekend.