I hope you have all had a great week and were able to keep it green. What a crazy week it was on Wall Street! On Monday and Tuesday, the markets were up and it felt like the new bull rally had begun. By Thursday however, all hell broke loose and the market experienced a big selloff two days in a row. Let’s recap the week together.
Monday was an amazing day for the market. The S&P 500 recovered all of its losses since March. Interestingly, there has never been a year where the S&P 500 dropped more than 20% and was able to recover it losses within that same year. It’s a first! It also appears that it was a textbook definition of a V-shaped recovery.
On Wednesday, Tesla Inc. (ticker: TSLA) reached a new high of $1,000 per share. And yes, I agree with Elon’s tweet from May 1, Tesla’s stock is too high IMO! Then and now!
Also on Wednesday, the market did not react well to the outcome of the Federal Open Market Committee meeting. Federal Reserve Chair Jerome Powell continued the sentiment of “whatever it takes” to help the economy and assured Americans that interest rates will remain near zero until 2022. Despite those comments, a second wave of the coronavirus, as well as an expected slow recovery, had investors worried.
On Thursday and Friday, the market saw one of its biggest selloffs since March, while VIX (also known as the CBOE Volatility Index, and informally known as either the Wall Street Fear Factor or the Wall Street Fear Gauge) spiked up. All sectors finished the week in the red with Energy and Financials getting hammered once again.
Will the American economy recover quickly or slowly? Who really knows. Some analysts have been highlighting one very interesting statistic though that may be an accurate predictor. The personal savings rate for the month of April (but not reported/released until late May) came in at 33%, the highest it has ever been since the U.S. government began tracking this figure in the 1960s. Remember, 70% of the United States’ GDP comes from consumer spending, and if the savings rate continues to be this high, it will take much longer for the economy to recover.
It is unclear how the market will react in the upcoming week, but this past week has been truly humbling for many traders.
I would like to end this week’s market roundup with a quote from the renowned economist, John Maynard Keynes: “The market can remain irrational longer than you can stay solvent.” Try to manage your risk accordingly, re-evaluate your positions weekly, and always remember that this market can remain far more irrational than you can remain solvent! I hope it’s been a great weekend. Keep it green!