Despite the notable drop in the market last Friday, when the Dow Jones Industrial Average shed over 900 points, the major stock market averages posted substantial gains last week. The Dow gained 12.8% (its biggest weekly advance since 1938), the NASDAQ Composite rose 9.1%, and the Standard & Poor’s 500 Index added 10.3%.
Factors behind the gain in stock prices included buyers stepping in to scoop up perceived bargains during the bear market (an overall market drop of more than 20%), friendly monetary policy by the Federal Reserve, and perhaps most significantly, the $2 trillion corona virus relief package out of Washington.
The package, which is equivalent to about 9% of U.S. Gross Domestic Product , contains items including payments sent directly to individuals and families, expanded unemployment benefits, paid sick leave, student debt relief, additional health care funding, and loans and grants to businesses to deter employee layoffs. Overall, the market is comforted that large scale action is being taken on both the monetary and fiscal policy fronts.
The market has been relatively stable so far this morning, with the major averages currently up about 2%. Market sentiment remains under pressure however, by the toll of COVD-19, with the number of cases on the rise in the United States (which is now the country with the most confirmed cases), and the final economic impact along with its duration is still very uncertain.
Remember, the stock market is forward-looking (and it is also finicky). Expect the market volatility to continue during this difficult time for the country and the world. Our long term view remains that while COVID-19 may have ended the long running bull market, we believe the market and the country will get through this!
All the best – Southport Station Financial Management, LLC