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The week ahead (May 25, 2020)

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I know it’s a short Memorial Day holiday week for those of us in the US, but there’s still going to be economic data coming out!

The markets will be focused on initial jobless claims (2.1m expected) and May consumer confidence (85.0 vs 86.9) and Chicago PMI (43.0 vs 35.4).

Researchers are expecting an 8th straight week of slowed jobless claims which suggests the beyond the peak of inflows to unemployment. However the amounts are still staggering which suggests that folks aren’t getting off of unemployment quickly. Until these workers can get back to work, consumer and business sentiment will remain weak.

On Thursday, a second release for Q1 GDP (-4.8% vs +2.1%) will come out. On Friday, personal income data (-9.0% vs. -2.0%) and consumption data (-8.5% vs. -7.5%) will come out and show the obvious weaknesses there.

We should expect similar hits to investment spending, with new home sales on Tuesday (469k vs 741k) and pending home sales (-15.0% vs -20.8%).

Economists will also be on the lookout for Fed communication ahead of the June 10th FOMC meeting, although they are not expecting anything new. The April FOMC minutes stated “a number of participants judged that there was a substantial likelihood of additional waves of [virus] outbreak in the near or medium term,” which you know I’m expecting as well. Which leads us to my main indicator I am trying to track…

DAILY NEW CONFIRMED COVID CASES. A second wave is, in my opinion, the biggest near-to-mid term driver of the stock market. Without a therapeutic/vaccine on the upside or second wave on the downside, we may be stuck in this purgatory range of $2,800-$3,000 on the S&P.

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