SUPRISE!

Issue #33

Wow!

Total nonfarm payroll employment rose by 2.5 million in May, and the unemployment rate declined to 13.3 percent, as reported by the U.S. Bureau of Labor Statistics Friday June 5, 2020.

Consensus was for unemployment to hit +/- 19%, so this was a BIG suprise.

Once again the technicals have led the fundamentals with equity market indexes steadily rising since late March. In fact, as of yesterday’s close both the S&P500 and the NASDAQ are positive on a year to date basis.

So, now what?


Howard Lindzon re-Tweeted a post from Ryan Detrick, CMT that I think is worth sharing. In the post Ryan looks at the recent rally in stocks and compares it to past rallies of similar duration (50 days) and shows how the markets performed over the next year.

“50 trading days after the bear market ended and the S&P 500 is now up 39.6%, for the best 50-day rally ever. Looking at the other largest 50-day rallies, they tend to take place at the start of new bull markets and the future returns 6- and 12-months later are quite strong”.


The Capital Group has also put out some interesting reports that support the above.

“The largest post-1950 quarterly GDP decline was 10% in the first quarter of 1958.

This sharp drop came amid the 1957–1958 recession, which resulted from a confluence of factors, including a flu pandemic. While the makeup of the present-day economy is much different, the U.S. is not unfamiliar with pandemic-related economic turmoil. The U.S. economy bounced back strongly in the late 1950s, with growth surpassing 5%.

The good news is that recessions generally haven’t lasted very long. While this time may be different, a Capital Group analysis of 10 cycles since 1950 shows that recessions have ranged from eight to 18 months, with the average lasting about 11 months…. The average expansion increased economic output by 25%, whereas the average recession reduced GDP by less than 2%”.


PODCAST:

Panic with Friends, episode 74 is a great interview with Balaji Srinivasan the former CTO of coinbase and a former GP at a16z, it is a great conversation on the current pandemic and it closes with some thoughts on crypto.

Yahoo Finance interview with Mohamed El-Erian was fantastic and worth watching. Mohamed discusses the current unemployment numbers which were a big suprise and talks about the win win scenario for investors.


I hope you enjoyed the letter and as always feel free to share it with friends and colleagues. If you are interested in startups you can join over 750 other backers that follow my syndicate here.

Be well and stay safe. - Sean Bill / MacroCrunch