Equities Rise As Unemployment Hits New Highs… What’s Driving the Rally?

The U.S. unemployment rate clocked in at a disastrous 14.7% on Friday, hitting its highest point since the Depression. If that wasn’t bad enough, the report shows that the U.S. lost more than twice as many jobs as we did during the Great Recession… in approximately 1/12 of the time. And not included in that 14.7%? The record number of people who left the labor force altogether! And now that we’ve set the scene, here comes the paradox: also on Friday, the Dow Jones Industrial Average (DJIA), S&P 500^® Index, and Nasdaq-100 Index all rose more than 1.5%. So what gives? A market overweight to (the thus far resilient) Big Tech? The Technology and Communication Services sectors have both hit new highs recently, and are large enough to pull the rest of the market along with them. Effective fiscal and monetary intervention? Possibly, the Fed has gone on a massive shopping spree that’s doubled its balance sheet and a $2 trillion stimulus package is nothing to sneeze at. Or is it all down to irrational investors? We’ll have to wait and see. One thing’s for sure though; the COVID-19 threat is far from over. Global cases are still on the rise, and may continue to climb as reopening economies provide more opportunity for spread. Wuhan just reported its first new cluster since emerging from lockdown in early April… could that be a glimpse into our future as states begin lifting restrictions and returning to work?