Stocks Swing Wildly As Economic Recovery Begins

Published Friday, June 26, 2020, 7 p.m. EST

 While consumer sentiment survey data released today confirmed the economy is fighting to come back from the epidemic-induced shutdown, stock prices are continuing to swing wildly.

The University of Michigan's survey of consumer sentiment improved for the second month in a row.

Disposable personal income (DPI) per capita backed off from last month's history-making surge, but remained much higher than the historical norm.

DPI in April surged when Americans received government payments mandated by CARES Act, the federal emergency aid law enacted on March 27, 2020 in response to the Covid-19 crisis.

In May, DPI declined considerably as federal aid began to run out, but DPI was still way beyond normal and was having a material impact on the saving rate of U.S. households.

Yes, the savings rate declined from 32% in April to 23% in May, but it remained extremely high at the end of May.

Americans are sitting on a cash horde! They're not spending CARES Act payments because they're stuck at home.

Stock prices have swung wildly since the crisis started in March and volatility is to be expected in the months ahead.

On Friday, the Standard & Poor's 500 (S&P 500) index fell by -2.4%, to close at 3,009.05, -2.9% lower than a week ago, and +29.4% higher than the March 23rd bear market low.

The S&P 500 index closed two weeks ago with a +4.8% weekly gain, which followed a 3% gain and a 3.2% gain a week earlier.

Assets invested for life need not be influenced by the near-term risk of the virus crisis, which continues to fluctuate and attract speculation.


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