Stock market commentary for May 13, 2020

Stock market news

Today the comments Federal Reserve Chairman Jerome Powell made move the US stock market.

“Federal Reserve Chairman Jerome Powell said the central bank would continue to use its policy tools to mitigate the impact of the novel coronavirus on the U.S. economy, but warned that the length of the health crisis raises “longer-term concerns.”

Powell said in prepared remarks Wednesday that the depth and length of a recession can “leave behind lasting damage” to an economy’s productivity, a hint that those inside the Fed see slim chances of a quick, V-shaped recovery.

“The recovery may take some time to gather momentum, and the passage of time can turn liquidity problems into solvency problems,” Powell said.

Powell said household and business insolvencies and the loss of small and medium-sized businesses could “limit the strength of the recovery when it comes,” adding that the loss of jobs risks widening the skills gap depending on how long the unemployed remain without work.

Powell pointed to a Fed survey being released tomorrow that details a 40% loss of jobs among households making less than $40,000 a year.

A weak recovery, Powell said, could also harm business investment which would limit the return of jobs in a recovery.”

Source: https://finance.yahoo.com/news/federal-reserve-chairman-powell-us-economy-faces-longer-term-concerns-130001781.html

“Dow futures stumble as Fed’s Powell says economic outlook uncertain”

Source: https://www.marketwatch.com/story/stock-index-futures-edge-higher-ahead-of-remarks-by-feds-powell-2020-05-13?siteid=yhoof2&yptr=yahoo

Stock market factors to consider

The following can be said after hearing the comments from Federal Reserve Chairman Jerome Powell.

  • A lasting damage to the US economy
  • A V-shape recovery that is not so realistic
  • Negative interest rates are for now off the table
  • Longer-term concerns about the economic outlook

To the extent that the labor market does not recover as quickly as expected the US economic growth may witness a delay in recovery, and this is negative for the stocks and their profitability, valuation.

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