Don't expect the March 24 gains to hold up
Mar 25, 2020 | 12:00 am
During the past few weeks we’ve witnessed tremendous volatility in financial markets.
Markets gyrated wildly as analysts attempted to quantify the economic impact of the global COVID-19 pandemic. Yesterday (March 24, 2020), the DOW stocks had their best day since 1933, rising over 11%. This was attributed to anticipation that Congress would pass a $2 trillion stimulus package.
By this morning (March 25, 2020), the stimulus package deal was reached, but don’t expect markets to be calm going forward.
My eyes are firmly set on tomorrow’s employment report, which is widely expected to show a dramatic increase in unemployment—possibly an unprecedented change—that will instantly vault us well above the current unemployment rate floor of 3.5%. The big question is whether the aforementioned recent market gains will hold up in the face of very dire news about layoffs. Presumably, since this outcome has been expected for weeks, it has already been incorporated by the markets. But I suspect not all of it has been properly digested. Combine that with what are certain to be alarming new infection numbers and the stage may well be set for a quick reversal in financial markets.
There’s a likelihood that the gigantic $2 trillion stimulus package may be insufficient to stem the tide of bad economic news, and that households and corporations will soon be looking to Congress for another one.