Checking in on the Stock Market

Another rocky week as the market bumps along waiting for the world to reopen ~

• Early trading saw stock’s rise on demand from short sellers who were forced to cover their bets and buy shares they shorted. In industry lingo it’s called a short-squeeze.  It might be time to watch the Big Short tonight.
• Trading was up on the news that we’ve reached 20% Unemployment and not 32% which the Fed ultimately anticipates. Perversely, stocks often do better when the market sees evidence of rising unemployment because the “overhang” or extra costs are being removed. (MarketWatch)  On the positive side, it means 80% of Americans still have their jobs and many continue to contribute to their 401(K)s creating demand.
• Thought you’d never cheer for rising oil prices! Yep, yesterday’s rising oil prices are helping to stabilize the energy sector which saw buyers have to pay producers not to take shipment of oil for the first time ever.
• Another round of relief to Small Businesses comes with appropriate guidance from the Treasury. Thank you! But how sad!
• Mixed earning reports drove rewards for some and punished others with mixed trading results.

Most importantly, there is growing caution among seasoned investors monitoring the timeline of this event. The market clearly priced in a few months of shut down. But as protestors push to re-open businesses despite community spread concerns, investors shift their focus from a brief deep V recovery into expectations of U shaped recovery. 

In The Weeds –

The most profound economic development this week was watching true supply & demand market forces take control of the oil pricing. Oil has had a storied history with the owners of the largest oil reserves creating a cartel to manage world pricing based on supply. The Organization of the Petroleum Exporting Countries (OPEC) is a cartel consisting of over a dozen major oil-exporting nations including Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and Venezuela. They are economically incented to work closely together to manage supply just ahead of demand which ultimately maintains world pricing levels. OPEC is not considered a monopoly as there are other producers outside of the group like Russia, China, Mexico and the U.S. Ultimately, the shutdown of the world’s various economies has broken OPEC’s control by almost eliminating demand. For the first time in history, the demand side of the market equation controls the pricing. True free market pricing at work!

The good news of the day! Yes, there is good news!  The Treasury department has put out guidance for Small Business owners accepting Payment Protection Program (PPP) funds ahead of this next wave and the Small Business Administration has provided additional clarification regarding the required Certifications that all participants must sign. Specifically, the SBA has highlighted the inconsistencies in good faith with public companies who have substantial market value and access to capital markets accepting the PPP funds. (Bloomberg)  Additional, chain restaurants like Sweetgreen’s Inc. returned loans today following in Shake Shacks steps. It appears that the Small Business & Entrepreneurship Senate Committee has a new game for this fall, chasing down public companies that accepted PPP funds. It’s a shame that we couldn’t get this right from the beginning!  

So what to do now?   

Stay healthy, engage in an ethics dialog with your family, help the food banks in your community, and continue to be your amazing selves!

We will come out stronger for all that we’ve been through!  #BeTheCalm!!! #RealLeadership!!!

Stay Healthy! Susie

Please LIKE or leave a comment!