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Presidio Wealth Management Market Update 06/16/2020

June 16, 2020
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The S&P 500 is set for another volatile week as the Dow traded down more than 760 points yesterday before rebounding to close up 157.  The Federal Reserve announced further measures to support the market amid the corona virus pandemic.  This time by an unprecedented move to purchase individual corporate bonds on the secondary market.  The Fed is proving that they are willing to step into any part of the market to help support an economic recovery.  The saying "don't fight the fed" is in effect and may prove to be effective in the short-term but the ill affects could show up in the future in the form of higher inflation and taxes as the US deficit balloons.  
We believe that the easy money has been made as we have recovered from the March 23rd lows rebounding more than 40% to close near break-even on June 8th.  
Tony Dwyer of Canaccord Genuity believes we are in the frustration phase where the market usually trades between two extremes: "Either feels like it's going to crash or go up in a straightline." 
One of the things adding to the frustration is the large divide between the massive stock market rebound and the slower rebound in economic activity.
Source: CNBC
There are many cross currents of data and confusion in the markets but we are starting to see some positive economic data that is implying a more sustainable trend.
On June 5th economists expected payrolls to drop by 8.44 million and the unemployment rate to rise to 19.5% from 14.7% in April.
To everyone's surprise employment rose by 2.5 million and the jobless rate declined to 13.3%, according to the Labor Department.  The data was far better than expected and indicated that an economic turnaround could be happening faster than anticipated.
The Dow is currently up over 600 points as of my writing due to a report out this morning which showed positive retail sales data in May.  Relative to April, retail sales rose by a record of 17.7%, which was more than double the expectations from economists and well more than double the next strongest month back in October 2001.
 
Source: Bespoke
Even after the largest monthly increase on record, retail sales remain well in the hole compared to where they were at their highs in January.  Showing a great deal of improvement but still almost 40% off the prior high. 
 
Source: Bespoke
"When the facts change, I change my mind."  John Maynerd Keynes
 
That is certainly the case, with the tremendous run up in the stock market and lack of clarity from any economic data it looked like the stock market was 12 to 18 months ahead of economic data.  The most recent data has shown that there are some green shoots in improving economic activity.  We still remain cautiously optimistic that the economy will continue to improve as states open back up.  
 
The hope that we will get a vaccine to put the corona virus pandemic behind us and the 4.6 trillion of cash still on the sidelines warrants some optimism that the economy and the markets have the ability to continue to heal.
It is normal to feel anxiety over the current market volatility. We are here to help!  Please reach out to our office if you need to discuss your financial situation.

Parker Christiansen 
CEO / Wealth Advisor 
Presidio Wealth Management
  
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