Don’t fight the Fed.
This was the best of weeks, and it was the worst of weeks.
To start with the “worst:” we learned that 6.6 million more people filed for unemployment for the first time, for a three-week tally of more than 16 million and taking the jobless rate up to 10% or more, even as it likely underestimates the number of people who haven’t been able to get through to overburdened state unemployment systems.
The “best” part may have been just as unsettling. Stocks had their best week in over four decades, with the Dow DJIA, -1.42% up 12.67%, the S&P 500 SPX, -1.26% gaining 12.1%, and the Nasdaq COMP, -0.74% up 10.59%.
In fact, two sectors of the S&P 500 charted their strongest week ever. The chart above shows the sector performances, with data from Dow Jones Market Data. The real estate sector was only launched in 2016; historical data before that is back-tested. All the other sector data dates back to 1989.
First, it’s important to note that many strategists think markets haven’t fully grasped the scope of the devastation the coronavirus will wreak on the economy, let alone the human toll. And for now, the unprecedented actions by the Federal Reserve and other central banks are helping keep investors numb.
“Stocks are up because the damage to the economy — evident in claims — is beyond comprehension, while the response of the Fed is easier to understand,” wrote Chris Low, chief economist for FHN Financial, in a note out Thursday after the jobless claims data.
And most strategists think stocks are likely to take a leg lower from here. Investors haven’t yet had a true “capitulation,” Kim Forrest, founder and CIO of Bokeh Capital Management, told MarketWatch. Analysts at Goldman Sachs agree.