Earlier this week, the Dow crossed 30,000 – an achievement which, in other times, would have been something to celebrate but given the current environment, is a head scratcher. Covid hit a third wave of infections with cities and countries going back to lockdown mode as daily deaths continue to rise. That coupled with increase in jobless claims in the US for the second straight week are hardly the ideal conditions that one would expect to see the stock market hit all time highs. To put it in perspective, jobless claims had not increased for two straight weeks since July. While being lower from March, the increase in jobless claims are closely tied to an increase in virus cases which has prompted more stringent regulations from industries that had begun opening up and resumed hiring.
On the other hand, consumer confidence numbers grew in October reflecting an increase in consumer spending heading into holiday season. Sales of newly built homes hit a new high in nearly 14 years. And, despite higher unemployment numbers, consumers continue to spend, driving factory orders higher.
All of these data points, taken together, give a muddled picture of the market and the economy for the investor.
Future Wealth’s View
If this has been one crazy year thus far, it is only fitting that it gets crazier as we come to the end of the year. The mixed signals from the market and the economy has been an ongoing concern all year and it is now further exacerbated by certainty in some areas – Presidential elections (although our ex-President is still going through the five steps of grief and appears to be stuck in the first step – denial) and continued uncertainty in other areas – vaccine timeline and availability.
That said, we believe that the market is looking beyond the near term uncertainty and looking ahead 2021 when things return to normal. Of course, the big risk is if things don’t return to normal by mid 2021. That would be an expensive lesson for all of us.