How Did Stocks Do in the Second Quarter?
Despite the fact that the U.S. and Canadian economics tumbled into a COVID-19-fueled recession, U.S. stocks ended up having their best quarter in more than 20 years and are trading at or near record levels. Unfortunately, that investor optimism may be misplaced. The U.S. and Canadian economies are still a mess and coronavirus numbers south of the border are raging. In fact, the U.S. is responsible for the most coronavirus cases.
Canada the U.S. are in the depths of a recession, but you’d never know it by looking at the stock market. The Dow Jones Industrial average recorded its best quarter since 1987, rising 17.8%. The S&P 500 meanwhile had its best quarter since 1998, advancing 19.9%. Meanwhile, the tech-heavy Nasdaq reported its best quarter since 1998, jumping 30.6%.
In Canada, the TSX logged its best quarter in more than a decade, closing up 16% over the first quarter.
How Are the Canadian and U.S. Economies Doing?
U.S. and Canadian stocks are rising in spite of terrible economic data. Statistics Canada reported that the Canadian economy experienced its largest monthly drop ever in April, with gross domestic product (GDP) cratering 11.6%. In March, GDP tumbled 7.5%.
Virtually every sector was hit by the coronavirus pandemic. Manufacturing was down 22.5%, food manufacturing slipped 12.8%, the accommodation and food services sector cratered 42.4%, accommodation services fell 45.7%, the arts and entertainment sector declined 25.6%, and construction was down 22.9%.
While the Canadian economy may experience a rebound in May and June, ongoing growth is expected to be glacial, as coronavirus numbers continue to climb. U.S economic data has been encouraging, but it only tells part of the story. The U.S. added a record 4.8 million jobs in June with the unemployment rate falling to 11.1%.
The numbers were better than expected with the unemployment rate falling more than predicted.
But again, there’s more to the story. The U.S. economy has still lost approximately 14.7 million jobs since February. The unemployment rate is down significantly since hitting 14.7% in April, but, it’s at its highest levels since the Great Recession.
Economists were hoping for a quick recovery, but that is highly unlikely. The U.S. economy remains in a deep recession and COVID-19 continues to spread across the country, pointing to further shutdowns and lay-offs.
People have been worried about a second wave of COVID-19, but the fact is, the first wave isn’t over yet. And even the World Health Organization has warned the worst “is yet to come.”
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Stocks may be at record levels and just had their best quarter in more than 20 years, but those gains are not supported by strong economic data. The U.S. and Canada are in a deep recession and the economic recovery is going to be slow. Moreover, COVID-19 continues to spread and by all accounts, the worst is yet to come.
While this does not bode well for equities, the trading experts at Learn-To-Trade.com can show investors how to trade more confidently and profit more consistently no matter what’s happening on Bay Street or Wall Street.
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