Stocks Keep Rising, While Investment Shops Keep Warning: What’s Wall Street Saying?

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Investors, while posturing somewhat defensively, keep looking past the likely 2020 recession caused by the coronavirus. Still, Wall Street does warn against stocks in the near-term. 

After a rocky trading day, all three major U.S. indices rose Thursday, with the S&P 500 up 0.58% and the Nasdaq up 1.66%. Investors also moved into the 10 year treasury bond, sending the yield down to 0.61%. 

Investors, while they move into treasuries, also are moving into tech companies less impacted by the virus. Amazon  (AMZN) - Get Report, Netflix  (NFLX) - Get Report and Microsoft  (MSFT) - Get Report rose 4.3%, 2.9% and 2.9% respectively Thursday. 

The market has largely been looking past the recession, as some economies intend to reopen. Germany and some states in the U.S. may do so i the month of may, although the rate of economic recovery may be slow, as lockdowns ease rather than outright end. 

Meanwhile, stock valuations are rich again, as the S&P 500 is still up 24% from its March 23 2020 low, at which point a recession was clearly priced in. 

Jobless clams for the past week were 5 million, bringing the total number of recorded claims in the past few readings to around 15 million, a significant chunk of the U.S. population. 

Here’s what Wall Street is saying:

Seemah Shah, Chief Strategist, Principal Global Investors: 

“While today’s jobless numbers are down on last week, they still mean that all the job gains since the financial crisis have been erased in the space of just four weeks. What’s more, with many workers, including those in the gig economy, not included in these numbers, labour market pains may be even worse than these numbers suggest.At the same time, while the rise in jobless claims is astounding, they are no worse than broadly expected. Markets have already essentially priced in a very sharp rise in unemployment in the first half of the year, so market reaction may in fact be limited. However, concerns for the second half of the year may be underestimated. Although governments are looking to lift lockdowns, the re-opening of economies will be only gradual, compounding financial strains for businesses and households, suppressing demand and suggesting a slower economic recovery.”

Jasper Lawler, Head of Research, London Capital Group:

"Worries over the damage done to economic growth from social distancing policies have resurfaced. Some of the worst economic data on record and IMF predictions for a severe recession are raising alarm bells about the current market rally. Germany, France and the UK will keep restrictions in place for at least two more weeks. US President Trump is talking up a return to work for some States but it looks a way off in places like New York.”

Ipek Ozkardeskaya, Senior Analyst, Swissquote Bank:

"Now it is too early to tell whether we are at the peak of another roller coaster ride, but the chances are that we see a renewed bearish wave. There is a stronger case building for a W-shape correction. Investor appetite may not return to ideal levels before the much-dreaded earnings season.”

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