Market Update

Volatility Reemerges After “Too Far, Too Fast” Stock Gains

As policymakers discuss the appropriate course for reopening the economy and mitigating both health and economic risks, it can be just as challenging to make personal decisions about how to proceed. Understanding recent volatility in the financial markets may be adding to your sense of uncertainty, we want to share with our valued clients the latest insights from strategists at Raymond James.

  • The S&P 500 index has experienced declines this week. Volatility can be attributed to a variety of factors:
    • concerns from national health advisors over a possible resurgence in the spread of the virus as a result of reopening the country too soon
    • comments by the Federal Reserve chairman emphasizing downside risks to the economy
    • elevated jobless claims
    • partisan differences on additional fiscal stimulus legislation
    • renewed tensions between the United States and China
  • “As difficulties in ending social distancing has become more apparent, hopes for a rapid recovery seem to have faded,” Raymond James Chief Economist Scott Brown said.
  • The S&P 500 had gained 31% over a 26-day period in April – too far, too fast, according to Joey Madere, senior portfolio strategist for the Equity Portfolio & Technical Strategy group. “In the short term, we would use the market pullback as an opportunity to continue to accumulate equities for the longer term. Remember, bear markets are often very fast and violent, whereas bull markets can last for years.”
  • Raymond James Washington Policy Analyst Ed Mills is watching two developments that may affect markets: fiscal stimulus negotiations in Congress and the U.S.-China relationship. Tense negotiations on stimulus could push the next phase of legislative relief response into June. And signs of escalating tensions in the U.S.-China relationship pose a potentially significant risk for the market in the second half of this year, with the Phase One agreement reached prior to the pandemic possibly in jeopardy. “Election year political considerations increase the odds of a return to confrontation in the coming months,” Mills said.