Making New Highs
It has been an interesting week for the U.S. Equity markets. Most market participants were anticipating a much bigger sell-off or correction, especially considering how big of a run the markets have been on and the spike in new COVID-19 cases. The major U.S. market averages are up over 40% from their March 23rd lows and the NASDAQ market reached a new all-time closing high on Tuesday of 10,131.37. At some point, the market must pause and digest some of these gains. We saw some of what that looks like when the Dow Jones Industrial Average lost over 700 points on Tuesday. Yet investors are finding reasons to buy stocks yet again today, even with new coronavirus cases spinning out of control in several states. Disneyland announced today they are delaying the opening of their theme parks at least another 1-2 weeks and Major League Baseball is trying to salvage an abbreviated season, but several players have already announced they have tested positive for the coronavirus. We continue to recommend clients check in with us to see if there are changes needed that would benefit their portfolio.
It looks like the financial sector is getting a shot in the arm today. The Volcker Rule, which was put in place after the 2008 Financial crisis to limit the types of products banks can invest in, is being modified in favor of the banks. This means that banks can now own private equity funds, derivatives and hedge funds and participate in proprietary trading. In addition, the Federal Reserve announced after the close of the market on Thursday, the results of the latest bank stress tests. According to the announcement, the Fed has ordered banks to limit dividends and halt buybacks for now, warning a prolonged downturn caused by the pandemic could saddle the banks with loan defaults. Several bank stocks were down in after-hours trading. The financial sector rallied on the Volcker Rule news. The news helped put a floor under the market sell off for now. It is possible that the markets continue to sell-off as the news on reopening the United States economy continues to disappoint and many are already fearing the 2020 election results. Long-term if we want to change the direction of our country, we all need to get involved. My father in law who is 81 is running for county commissioner in Traverse City, Michigan and is loving it. Go Hal Gurian.
I plan to produce these Market Moment notes from my office in my basement every week on Friday.
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Stay safe and keep your family close during these difficult times.
More next week.
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