DAILY INSIGHTS

China stands out. The Organization for Economic Co-operation and Development (OECD) composite leading indicators, released May 12, fell to near 2008–09 financial crisis lows. It was interesting that China’s index rose in April after a big bounce in March, the only major country upgrade last month, and potentially indicative of a “V-shaped” recovery. Though the global index is near financial crisis lows, China’s experience and the temporary nature of the pandemic threat suggest a solid second-half recovery in the United States is possible.

Stocks sell off. Stocks opened lower across the board in the United States with Asian and European markets pulling back as well. On Wednesday, Federal Reserve (Fed) Chairman Jerome Powell highlighted the economy’s challenges, especially for the labor market, and called for more fiscal stimulus. Given extreme economic uncertainty and very weak data, Powell’s cautious message diminished equity investor’s risk appetite. Powell also reiterated that the Fed is not considering utilizing negative rates. Meanwhile, US-China tensions continue to simmer.

Unemployment claims slowing, but elevated. Today marks another round of weekly unemployment claim reporting. According to the Bureau of Labor Statistics, initial jobless claims for the week ending May 9 came in at 2.98 million, slightly above consensus, but showed a decline of almost 200,000 claims from the prior week. It marks the sixth week of improvement, although an astounding 36.5 million people have filed for unemployment insurance since the lockdowns started in mid-March. Historically, major bear market lows have tended to occur near the biggest surges in weekly jobless claims, which happened March 26 and April 2.

How expensive are stocks right now? As stocks have rallied about 30% off the March 23 lows and earnings expectations were cut dramatically, valuations have become increasingly concerning for many investors—including some high-profile hedge fund managers quoted in the financial press. We provide some perspective on elevated stock market valuations later today on the LPL Research blog.

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