In this holiday-shortened week, the markets will end the second quarter registering significant gains despite a resurgence of the coronavirus that has created an uptick in volatility and uncertainty.
The third quarter gets off to a fast start with minutes from the last Federal Reserve (Fed) meeting and the June payroll data. The Fed minutes should reiterate the position that the Fed will be holding rates at zero and maintaining stimulus for at least the next 18 months. The June payroll data will be another market-moving economic release, given the previous challenge in forecasting the May number. The expectation is for an addition of 3 million jobs after 2.5 million last month, and an unemployment rate of 12.5%, down approximately 0.8% from the prior month.
The markets will be very focused on the balance of economic activity and the amount of stimulus. The reality is that the potential for economic growth is high, given the amount of money in the economy. But the challenge is that economic activity is constrained by the virus, creating a very unstable level of activity until a medical solution is widely available, which probably won’t occur until late in 2020.
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