Covid-19 headlines have continued to dominate US equity market action. While the S&P 500 index has rallied to recoup all losses since its 23 March low, a second wave of coronavirus cases could upend investor confidence, raising the prospect of a fresh round of social-distancing restrictions or layoffs.
Stocks have been consolidating their post-23 March gains over the past few weeks, and we are beginning to see a shift from services/consumer-led growth toward more investment-led growth.
These growth sectors currently employ nearly 40 million people - nearly three times the 13.7 million employed by the sectors expected to contract, such as restaurants and retailers.
This is good news, but if the economy is transitioning from having been nearly 70% driven by consumer spending toward investment-based drivers, the ride is likely to be bumpy.
On the labour front, markets have welcomed declining initial jobless claims and surprisingly upbeat jobs reports for May and June. However, continued claims suggest that many job losses may become permanent, as businesses struggle to reopen and unused resources and skills become outdated.
There has been increasing attention devoted to signs of speculation in the market - notably among smaller newly-minted day traders' activity in bankruptcy stocks and in the options market.
Clearly there is a relationship between the virus and investor sentiment in terms of age cohorts, as much of the speculation in the stock market over the past few months has been concentrated among younger/newer investors and traders.
Sentiment is a mixed bag, but one thing is certain - the hole from which the economy has to emerge, however narrow, is deep enough to suggest initial market-based enthusiasm for a sharp recovery may have been unfounded.
We have been highlighting the warp speed nature of this crisis - with a 'full' market cycle having been condensed into a few months.
The wild swings have emboldened some investors and traders, while leaving others in a state of confusion. We have been suggesting that investors remain at their long-term strategic equity allocations, but react to the larger swings by considering rebalancing more frequently.
This allows portfolios to 'stay in gear' by trimming into strength and adding into weakness, rather than trying to time short-term peaks and troughs.
Richard Flynn is UK managing director of Charles Schwab
• The S&P 500 index has rallied to recoup all losses since its 23 March low
• US initial jobless claims have continued their downward trend, and we have seen two straight months of upbeat jobs data
• We are beginning to see a shift from services/consumer-led growth toward more investment-led growth, and these growth sectors currently employ nearly 40 million people, which will help lift the labour market
• The latest surge in new virus cases shows there are still ongoing risks to the recovery, and the US market's rally could be short lived
• Continued jobless claims over the past few weeks suggest that many job losses may become permanent as businesses struggle to reopen and unused resources and skills become outdated
• Fed-provided liquidity has been a powerful elixir for stocks, but its emergency measures will eventually have to be pared back