The Dow Jones mounted an extraordinary rally on Monday, rising more than 1,200 points as stock market bulls saw a glimpse of light at the end of the long and dark tunnel of the coronavirus pandemic.
Worryingly for the Dow’s rally, JPMorgan Chase boss Jamie Dimon believes both recession and further financial stress lie on the horizon.
All three of the major U.S. stock market indices rose in powerful unison to start the week:
In the commodity sector, crude oil was under pressure, falling 8% to $26 per barrel. A supply cut agreement between Russia and Saudi Arabia does not look as imminent as President Trump had led investors to believe.
The price of gold rallied past $1,700 as the U.S. dollar weakened in risk-on conditions.
Global coronavirus cases are now above 1.3 million, but the stock market appeared to take heart from the fact that the storm may be reaching its apex in some of the worst-hit regions.
In New York – the home of Wall Street and the epicenter of the crisis in the U.S. – Governor Cuomo presented encouraging signs that the local outbreak may be peaking.
While the headlines announced that coronavirus deaths in the United States surpassed the ominous 10,000 mark, investors tracking the trend lines know that the tide is turning in a positive direction.
Pure optimism looks to be lifting the Dow, as investors gamble on a quick rebound for the U.S. economy fueled by a genuinely astronomical increase in the Federal Reserve’s balance sheet.
Unfortunately, some of Wall Street’s biggest players are still extremely anxious about the future, suggesting bulls may not be out of the woods yet.
JPMorgan Chase published its annual letter to shareholders, where Chairman and CEO Jamie Dimon outlined just how uncertain the future is – even for one of Wall Street’s largest banks.
We don’t know exactly what the future will hold — but at a minimum, we assume that it will include a bad recession combined with some kind of financial stress similar to the global financial crisis of 2008. Our bank cannot be immune to the effects of this kind of stress.
JPMorgan anticipates a sharp Q2 recession that sees GDP contract as much as 25%. That’s only slightly more optimistic than fellow Dow 30 member Goldman Sachs, which forecasts a 34% contraction.
At the epicenter of Dimon’s “financial stress” prediction is the mortgage industry, where the sudden stop brought on by COVID-19, as well as Fed policy actions, have created a dangerous situation worthy of some monitoring.
A euphoric day for the Dow 30 saw every single member of the index rise at least 1%.
A characteristically-volatile Boeing led the gains with an incredible 17% rally to $145, while fellow DJIA heavyweight Apple climbed 6%.
The Dow Jones’ newest member, Raytheon Technologies, found its feet. The post-merger aerospace and defense giant rose more than 15%.
Jamie Dimon and JPMorgan Chase enjoyed a 5.5% rally despite his rather dire predictions. JPM’s rally accompanied a spike in Treasury yields, with the yield on the benchmark 10-year note rising more than 12%.