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Without a safe and available vaccine, solid improvements in the direction of the economy are ultimately the key prerequisite for a viable rebound in the market.

June 01, 2020


  • Data suggest the dire conditions wrought by the abrupt shutdown are turning the corner.
  • The stock market has begun to show initial and intermittent signs of broadening out.
  • As lockdown restrictions continue to be lifted, the focus for further economic trends will be on the healing of the labor market.

As economic data releases continue to deliver dismal headlines, analysts mine for indicators that the economy has bottomed, and optimists hunt for any sign that confidence is inching higher. There’s a near daily count of “green shoots,” or data that suggest the dire conditions wrought by the abrupt shutdown are turning the corner. Chairman of the Federal Reserve Jerome Powell issued a bleak forecast in mid-May as he said, “The scope and speed of this downturn are without modern precedent, significantly worse than any recession since World War II. We are seeing a severe decline in economic activity and in employment, and already the job gains of the past decade have been erased.”

In a 60 Minutes appearance, Powell sounded more upbeat, commenting that if there isn’t a COVID-19 second wave the economy could recover “steadily” during the second half of the year. Moreover, he reminded viewers that in terms of more monetary help from the Fed, “There’s really no limit to what we can do.” In a recent interview Larry Kudlow, the White House National Economic Council Director, said the unemployment figures nearing election day will be “very, very tough numbers.” Still, Kudlow added, “We’re seeing some small glimmers of hope and growth.”

The May report from the Congressional Budget Office, which factored in developments in the COVID-19 pandemic, projected that the economy would begin to recover in the second half of 2020 as “concerns about the pandemic diminish and as state and local governments ease stay-at-home orders, bans on public gatherings, and other measures.” Although the report concluded that the labor market will begin healing “materially” in the fall, the advances will not compensate for the losses suffered during the economic shutdown.

As the U.S. economy begins to see restrictions lifted in all 50 states, threads of optimism are surfacing in daily data reports. With interest rates low, and the disbursement of emergency government aid for unemployment insurance, consumer confidence appears to be inching higher as surveys point to increased optimism in the prospect for an improving employment landscape.

Progress on effective therapies and vaccines offers global markets—and the world at large—hope for a return to the semblance of a more normal environment. But until they safely leave the clinical testing phases and are readily available, progress is needed in a sustained daily dose of less bad economic updates.

Read Quincy Krosby’s full June 2020 market commentary, “How Good Is ‘Less Bad’?" PDF (523 KB).

The views and opinions are those of the author at the time of publication and are subject to change at any time due to market or economic conditions. This document has been prepared solely for informational purposes. This is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

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Lisa M. Bennett