The Dow Jones Industrial Average rose nearly 500 points last Friday, but still finished solidly in the red for the week along with the other major market averages. Looking at last week’s totals – the Dow shed 5.5%, the NASDAQ Composite dropped 2.3%, and the Standard & Poor’s 500 Index declined 4.7%. The major turning point for the week was on Thursday when the Dow dropped nearly 7% or 1,861 points – which was its fourth worst point loss ever.
Factors behind the weekly decline included a somewhat somber tone by Federal Reserve Chairman Powell regarding how long it would take employment levels to recover, investor worry over increases in the number of Covid-19 cases, and some pure and simple profit taking after the market has been up significantly in the past several weeks. The Dow had been up nearly 50% since its low in late March, so it is certainly normal to have some sort of a pullback after that type of runup.
The downtrend from last week is so far carrying over to this morning as the Dow opened down about 600 points. The same themes from last week will be on investors minds in the week ahead. Fed Chair Powell is scheduled to testify before Congress on Tuesday and Wednesday and some of the commentary could move the market. Perhaps more importantly though, the market will continue to be focused on how the economic reopening is progressing throughout the country and the number of new coronavirus cases/hospitalizations/deaths. Fears of a delay or reversal in reopening the economy are the major factor weighing on the market right now, shifting the overall short term tone from Bullish to Bearish.
These are historic times, and the path of the coronavirus and timeline/outcome for treatments and a vaccine is unknowable/uncertain. Along with this larger than normal uncertainty, we expect the larger than normal market volatility to be with us throughout the pandemic. Longer term however, we believe the country and the global economy will get through this!
As always, please call us with any questions or to set up a meeting.
All the best – Southport Station Financial Management, LLC