Last week’s revelation of an unexpected increase of 2,509,000 new jobs during May was completely opposite to the loss of 7,500,000 jobs that economists had forecasted. The report is likely to be revised but still depicts an economy that is very tough to forecast in this pandemic environment. The headwinds of the economic shutdown to fight the coronavirus, which is now being lifted in phases almost everywhere in the Northern hemisphere, and the large infusion of fiscal and monetary stimulus make any predictions challenging.
Equity markets continue to rocket higher due to the stimulus and optimism for the future fueled by low interest rates and a seemingly newfound interest in trading, as evidenced by the increasing number of new retail trading accounts. The reversal in fortunes for equities in two short months has been impressive. The move will get harder from here, but it is difficult to get on the other side of the momentum.
Interest rates are starting to rise, which should be seen as a healthy sign with the yield curve steepening. This week, we will get a better perspective on the Federal Reserve's outlook as it completes a two-day meeting on Wednesday.
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