June 16, 2020

Bill Hastie |

Good morning,

With one announcement from the Federal Reserve yesterday, severe losses turned into much welcomed gains.  Down as much as 760 points, the Dow rallied to finish the day up more than 157 points (+0.62%) when the Fed announced they would begin buying individual corporate bonds.  This signaled the Fed’s attempt to a broader approach to corporate bond buying by an expansion into the secondary (investor) market.  The S&P 500 and NASDAQ followed the Dow, gaining 25.28 and 137.21 points, and 0.83% and 1.43%, respectively.

This morning, the Federal government reported a record 17.7% increase in retail sales for May, igniting a massive rally in Dow futures.  The markets seem to love positive news surprises as economists polled by Dow Jones a gain in retail sales of only 7.7%.

Market sentiment also improved after Bloomberg News reported that the Trump administration is drafting up to a $1 trillion infrastructure plan that would include traditional projects such as roads and bridges, as well as a 5G wireless infrastructure.

The challenge in finding the balance between reopening the economy (and seeing record retail sales) and containing the coronavirus continues.  While many states have reported an uptick in new COVID cases, some others have not – only to complicate the conversation further.  Evidence at this point of a “second wave” of the coronavirus is as varied as economists’ opinions about the health of the economy.

These are uncertain times we are in.  It is very difficult to make investment decisions when the market losses more than 1,800 points as it did last Thursday, and then with two economic reports we see an almost 1,000 points reversal yesterday and what looks to be a strong rally today.  Case in point to never let your emotions be the basis for your investment decisions.