Which indicator will trip the markets?

May 24, 2020 | Financial Planning | 0 comments

Every state has started to reopen its economy, which will give us the first true indications of the current economic direction, outlook into the full impact of the downturn and nature of the recovery. Of course, a spike in deaths from the virus will put us back in a place no one wants to go again. But, the only two indicators that will assure us the life as we knew could be back are: 

  1. Consumer sentiment and spending: The consumer has served as the strongest pillar of the economy for the last decade. But in March and April, consumer sentiment fell at a historic rate. Will consumers continue increasing their savings and or begin spending in the next six months? It is the $64,000, no – the trillion dollar question.

  2. Unemployment and wage growth: The biggest headlines have been around the record level of unemployment. Many are assuming that there will be an immediate drop once the economy reopens. But, will companies start hiring again or are they going to play it safe and freeze hiring till there are clear indications that the economy has recovered from the recession?

Future Wealth’s View

How these two indicators will impact the stock market is anyone’s guess. But, what is clear to us is that the markets are currently reflecting an optimism that most of us want to believe – that life will return to normal and we will all be once again stuck again in peak hour commute and willingly detest the meaningless meetings in the office. 

But, such is life today – that one would rather enjoy the 10 mile commute that takes 2 hours or standing in a line for food or ice cream that snakes around the block, than be stuck at home with little to do and requiring precaution when meeting anyone but those who we live with.

What does the future hold near term? It is anyone’s guess but living with anxiety that things will get worse is like having a voice that follows you around knowing all your insecurities. The market, in some ways, is the psychological counselor that we never asked for, but are happy that it is lifting our spirits in times of extreme stress.