The week ahead should prove interesting. Arguably, there is a pretty big disconnect from the stock market and the economy right now. The market seems quite optimistic while the economy continues to slide further. The 5 biggest companies in the S&P500 now equal the bottom 350. Talk about the tail wagging the dog. You guessed it, they are all tech companies. Therefore, the action we are seeing in the market indices may not accurately reflect the real economy.
A lot of earnings will come out this week and next along with guidance from these companies on what they're seeing in the economy. Also, the Federal Reserve meets this week and will share information on what they see in the economy on Wednesday. Many believe there is a "Fed put" in the market, meaning they will back up any asset in order to keep the economy going. Many expect Fed chairman Jerome Powell to address whether the Fed will ever directly support the stock market by buying stocks. No one ever thought this could happen in the U.S., but, then again, no one thought the Fed would be financing the purchase of junk bonds. The meeting Wednesday should be interesting. The Fed is on a slippery slope and soon we will find out if we really have a capitalist market where businesses that didn't properly prepare for or address risks are allowed to fail or if we have a nanny market where the Fed will do almost anything to keep it going. If it's the latter we really do have a "Fed put." There are a lot of issues and unintended consequences with that. Stay tuned...
Below is our second quarter commentary on what's happening in the markets. Click anywhere on the newsletter for a PDF version. Below page 4 of the commentary is a brief addendum discussing the week ahead.
 
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April 27, 2020
