Most of the other stocks in the broad indexes have performed very somewhere between reasonably well to poorly, depending on their status in the current environment. Airlines grounded and with little chance of resurgence in the intermediate term. Energy, especially oil based companies are struggling with $24 oil when most need at least $40 oil to explore and $50 oil to pay debt and other expenses. And little need to be said about the Leisure industry that is struggling with a way to reopen with caution or reopen at all. A number of other sectors have been in similar disruption, Consumer Staples have seen decent performance in products from napkins and makeup, to home appliances, but much less in some food and sweet beverage sectors. The point of bringing this scenario up is that selective companies have seen their stocks rally strongly pushing the NASDAQ Index to positive 1.7% for the year last Friday. However, the rest of the markets have been more balanced which left the other Indexes such as the S&P 500 and the Dow Jones at negative -9.3%% and -14.7% year to date for the same day, respectively. While this picture fits with the technical analysis picture, leaving me more neutral than negative, the typical media narrative is unsurprisingly bemoaning the end of the world again and that could be precariously persuasive.
The economic picture is still in limbo. Since no specific industry disconnect initiated the slowdown, the government mandated lockdown is the point of reference that should take much of guess work out of predicting the outcome. However, the outcome, whether a new normal or other meme, is open for both scientific and political debate, elevating the level of uncertainty that was beginning to clear with many states moving toward reopening. But roll in the Fed Chairman today and the caution that prevailed in his speech was similar to that of Dr. Fauci earlier in the week. Chairman Powell did mention the Feds resistance to negative interest rates and suggested that most of the Fed activities are more observant for now.
The comments made by more trusted professionals in Washington made little determination on the extent of the pandemic threat, simply that it will be present until a vaccine is found. But the uncertainty was not lost on the pundits and a source to generate ample fear. But just as the caution was expressed, I would have found more alarming had they mirrored the Administrations optimism. For now the challenge appears to be not if a vaccine will be found, to which Dr. Fauci seemed quite confident, only when. And the Fed is willing to wait and watch. This amount of caution injected into a subjectively overbought market is a good reason to expect some manageable selling, which we are experience now. This isn’t bad news, nor good news, just news.