The economy has been decimated by stay-at-home orders that forced businesses to close, put millions of people out of work and sent stocks tumbling into a bear market. Although the economy remains in the toilet, investors have decided to wear their rose-colored glasses lately.
Also helping lift investors’ spirits, Memorial Day travel was modestly higher than over the past several weeks, giving markets hope that business is starting to return to life. Travel and leisure companies are among Tuesday’s best performers, as local economies continued to reopen gradually across America.
But even as some economic data is beginning to point upward, there are still plenty of red flags.
The unemployment rate is at its worst since the Great Depression, with millions of Americans laid off or furloughed because of the pandemic. And while the decline in consumer confidence appears to have bottomed out, “the uneven path to recovery and potential second wave are likely to keep a cloud of uncertainty hanging over consumers’ heads,” said Lynn Franco, senior director of economic indicators at The Conference Board.
Meanwhile in Washington, policymakers pledged to continue to pump the economy full of stimulus to stave off a collapse.
“Risk appetite has been improving for a good couple of months now, partly on hopes over a vaccine but mainly because of expectations that the massive central bank and government stimulus packages announced in response to Covid-19 pandemic will fuel a speedy recovery in demand,” said Fawad Razaqzada, market analyst at ThinkMarkets.
All that positive sentiment in the market is weighing on traditionally safer bets like gold, the US dollar and US Treasury bonds.