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Equity markets looked past historically bad employment data and ended the week in positive territory. The S&P 500 rose 3.5%, and the Russell 2000 and Nasdaq were both up over 5% for the week. While I am ecstatic that the markets are coming back with such ferocity I remain cautious. I have broken down what you need to know from the week that was categorized by old sitcoms, hopefully it adds some levity.

Temporary lay offs. Good Times.


U.S. Department of Labor reported April’s unemployment rate at 14.7%, the highest level since records began in 1948 and well above the previous high of 10.8% in 1982. Separately, the government reported another 3.1 million initial unemployment claims, taking the total over 33 million in the past seven weeks. Remarkably, the S&P 500® index is now at the same level it occupied last summer, when the U.S. unemployment rate was 3.7%, indicating that equity markets have discounted negative near-term data.

Thursday, Friday, Happy Days


Health news is pushing markets higher.  Stocks rose on Thursday and Friday following an announcement that pharmaceutical company Moderna’s potential COVID-19 vaccine is moving quickly to a phase 2 and, potentially, a phase 3 trial. The positive reaction was similar to last week’s encouraging news about a potential therapeutic from Gilead.  Market optimism could be tested, however, if negative results emerge from the dozens of vaccine and therapeutic trials currently underway. Technology stocks have been clear near-term winners, the Nasdaq is now positive for the year.

Danger Will Robinson!



When you have drastic out performance by one market segment it is tempting to chase performance and move a substantial amount or your stock allocation into that sector. Don’t do it.  I believe there is a real danger in  abandoning long term disciplined principles like diversification to chase returns in Nasdaq stocks like Netflix, Zoom, Tesla and Shopify that appear to be in vogue at this moment. Watching the Nasdaq continue on its torrid pace higher reminds of 1999-2000 in that the move seems disconnected to the economic reality.  Today’s winners may not continue their persistent outperformance, as people are paying for unrealistic earnings growth on these stocks.  The 1999 bull run in tech ended 2 months after AOL purchased Time Warner a move which at the time had people like myself  scratching their heads wondering how it was AOL became more valuable than Time Warner?  A similar head scratcher happened in March of this year when Netflix became more valuable (higher market capitalization) than Disney.  On Friday, Disney passed back ahead of Netflix in terms of overall value but the fact that they have roughly the same overall value makes no sense to me. Disney consistently earns over ten billion dollars a year. 

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