Reexamining the Jobs Report, Reopening Trends, and Risky Investments

Economists (and the markets) were riding high off of Friday’s shining beacon of a jobs report, but some of that shine has rubbed off as analysts dig deeper into the numbers and reveal how a misclassification error monkeyed with the results. The main takeaway? The news is still good, just not as good as initially thought. Reopening is certainly powering some of the momentum, as it is in the manufacturing sector which has also gained some decent ground recently. Are these steps toward normalcy also injecting fuel into already-hot (too hot?) equities? More evidence suggests the S&P 500^® Index is overbought and the Nasdaq just topped 10,000 for the first time ever, thanks primarily to fresh all-time highs from the usual roster of big tech names—Amazon, Facebook, Microsoft, and Apple. What’s more, demand for shares of bankrupt companies has surged; Hertz stock has risen nearly 650% since its post-announcement low. Even small caps are in high demand! Are investors feeling a little overconfident now that all 50 states have begun lifting restrictions? While COVID-19 numbers are declining in the U.S., domestic hotspots remain and global numbers are still climbing, so Dr. Fauci’s “worst nightmare” isn’t over yet. One thing’s for sure, we’ll be tuning in as the FOMC releases its latest policy decisions—and first quarterly forecasts of 2020—this afternoon, which should give some indication of how they see the economic impact playing out from here.