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Weekly Market Recap – Week Ending June 12th, 2020

What Did The Market Indexes Do?

IndexWeek Week CloseYear-to-Date
Dow Jones Industrial Average-5.5%25,605.5-9.2%
NASDAQ Composite Index-2.3%9,588.8+7.4%
S&P 500 Index-4.7%3,041.3-5.0%

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Volatility is Back

The week started off relatively strong, and many thought we’d see yet another positive week (which would make four in a row). That is, until the market suddenly plummeted on Thursday. In fact, it was the biggest market intraday market decline since late March.

It’s hard to tell exactly what caused the drop, but many experts became concerned about a second coronavirus wave (after more new cases were confirmed), and the overall economic climate looking forward. Major indexes went down as much as 5% on the week due to the news.

This feels more in-line with the uncertainty of the economic climate. I’m not sure if we’ll see the Dow drop as low as it did in March, but I wouldn’t be surprised to see a lot of peaks and valleys through the rest of the year.

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We (Officially) Entered a Recession

This shouldn’t come as a surprise to you, but according to NBER (The National Bureau of Economic Research), the United States economy officially entered a recession in February. This brings an end to what was otherwise about ten years of consistent expansion.

NBER normally defines a recession as two quarters in a row showing a negative gross domestic product, however they have flexibility in how they officially determine this (i.e., how much of the economy is actually impacted, how quickly the recession occurred/occurs, and how deep the recession actually is).

A Long Road to Recovery

On Wednesday, Federal Reserve Chairman Jerome Powell cautioned that the United States economy still faces an extended route to recovery, together with unemployment likely to be high for years. It was obviously a vital turning point in the markets last week. This comes on the heels of the Federal Reserve indicating they foresee trying to keep their benchmark rate near zero until at least 2022.

Investors Expect Volatility

The Cboe Volatility Index is a resource that measures the current market unpredictability expectations of traders for the coming 30 days. Last week, the Cboe Volatility Index went up to 47% , which is the highest level since April.

According to Mark DeCambre of Marketwatch, it “has become well known as Wall Street’s “fear gauge,” since it was created in the early 1990s,” and it’s “been trading well above its historic average of 20 and surged to a record above 80 during the height of the COVID-19 pandemic in March.”

Bonds Gain Popularity (and Yields Lower)

While the stock market was floundering last week, investors started shifting money into federal government bonds, which drove the yields down. To give an example, the U.S. 10-year Treasury bond closed out the week before last at 0.91% APY. Last week, however, this lowered to 0.70% APY based on investors bidding on so many bonds.

This is interesting, because on one hand, it seems like some investors are moving out of stocks and into bonds (which are typically more stable), yet the yield is trending down due to the demand. I would watch the bond market more closely moving forward if you aren’t already.

Despite All of This, Consumers are Optimistic

On the other side of the spectrum, the most recent University of Michigan Consumer Sentiment Index shows that consumers across the country seem to be optimistic about the economy. The data, collected early this month, shows the CSI at 78.9, which is 9% higher than where it was just a few short weeks ago.

A Possible Second Stimulus

You may be hearing that the government is considering a second round of stimulus checks being sent out to American citizens in order to continue the stabilization of the economy. There’s still a lot more that has to happen, but if it ultimately did pass through Congress and get approved, it would be added to the already-distributed $267 billion by the IRS in 2020 so far.

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Author Bio

Total Articles: 126
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016.

Article comments

1 comment
Steveark says:

Really makes me glad I no longer have to work for money. Corporate life can be a lot of fun when the money is rolling in but in the oil and chemical sector I was in my old contacts tell me its a misery pit right now. About all those companies can do is try to minimize the billions of dollars they are losing, breaking even isn’t even a potential reality right now. And since senior management derives most of their income from stock awards and bonuses then those folks are not getting paid nearly as much and the misery and discontent just rolls downhill onto the everyday workers. I do not miss that at all and I feel for so many people employed in businesses that are losing money like oil, gas, tourism, restaurants, cruise lines, airlines, retail stores, stadiums, arenas and concert halls. Because the knee jerk reaction of senior management will always be to control the costs they can control, which invariably will be the people.