Despite Depression-like Unemployment, Markets Rebound

This insightful monthly market commentary will help you look beyond the headlines to better understand what is driving the current market trends that could impact your credit union’s investment portfolio.

Shelter-in-place efforts have sent unemployment to levels not seen since the Great Depression. Exhibit 1 provides visual support to just how swift and severe the economic carnage has been due to COVID-19 mitigation. Nonfarm payrolls shed 20.5 million jobs in April, which dramatically exceeds any previous period since records began in 1939.


Despite this grim picture of the U.S. labor market, the S&P 500 has risen more than 30% since the March low point. This dilemma has left many casual observers perplexed, but for veteran market participants, the power of the Fed is well known, particularly when asset purchases and lending facilities are utilized in concert with a whatever-it-takes attitude. The Fed’s liquidity onslaught effectively sucks volatility out of the market and reduces the supply of investable assets. Market functionality is smoothed, and asset valuations rise.

May At-A-Glance

  • Despite depression-like unemployment statistics, financial markets have rebounded strongly from the March lows.
  • Fed policies are having an extraordinary impact on market functionality, but Fed Chair Powell recently called for more fiscal aid to avert a deeper economic malaise.
  • Easing of shelter-in-place orders in the U.S., Europe, and Japan have fueled some investor optimism, but renewed tensions between the U.S. and China have dampened sentiment.

We’ve seen this play out before, in the Great Recession, more than a decade ago, and the current level of monetary support is on pace to be much greater than ever before. To be clear, there are still pockets of financial markets struggling to recover, particularly more credit-sensitive fixed income sectors not being directly supported by the Fed. While broad market functionality has greatly improved thanks to the Fed’s efforts, the economy still has a long way to go. As we noted in previous commentaries, it appears to be much easier to shut an economy down than to turn it back on. The weekly jobs data reveal that the May unemployment report will continue to show a historically high jobless rate, and it’s entirely possible that the unemployment rate could remain in double digits well into 2021.

Read more about the latest economic data and overall market trends here.

This market overview is provided by ALM First Financial Advisors, LLC, the investment advisor for Trust for Credit Unions. Read more from ALM First about the latest economic data releases and overall market trends at

June 10, 2020

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