Episode 29: Has the Stock Market Stabilized? [My Opinion]

Stock Market Stabilized

June 9th, 2020

Has the stock market reached a point of stabilization? Are the volatile swings up or down beginning to equalize? In this episode of Making Finance Fun, I’m going to do my best to answer that question. I’ll define what ‘stabilization’ means, look at how the S&P 500 and Dow Jones behaved in March-May, and address where we could go from here. After you hear the information I present, I’ll let YOU decide where the market stands.

Outline of This Episode

  • [2:00] What is the definition of stabilization?
  • [3:40] Stock market activity in March
  • [4:44] Stock market activity in April
  • [5:20] Stock market activity in May
  • [10:16] Where do we go from here?
  • [14:30] Have the stock markets reached stabilization?

What IS the definition of ‘stabilization’?

According to Lexico, stabilization is “The process of becoming or being made unlikely to change, fail, or decline.” When I look at the market, the question I ask myself is this: Has the insane volatility—big upswings and big downswings—stopped? Volatility is often viewed and referenced negatively. However, I do want to point out that volatility can also mean an upward spike—not just down. 

Stock market behaviors in March, April, and May

Although the Coronavirus pandemic technically started in February, I want to focus on how it impacted the market starting in March. The S&P 500 dropped 20% in March and the Dow Jones dropped 21%. Talk about a HUGE negative trend. From what I’ve read, it sounds like it was the worst-performing month of the stock market since the great depression. March brought wild swings in the market—sometimes 6–8% in a single day. 

April seemed like a polar opposite to March, with both the S&P 500 and the Dow up 13%. It can be categorized as one of the best months we’ve had in 35–40 years. But the market was still quite volatile. The Monday before the CARES act was passed, the market anticipated that it wasn’t going to pass and the market was DOWN. When the Senate passed the bill, the market had a huge upswing. Trillions of dollars were pumped into the economy. 

May has been largely uneventful and relatively calm in day-to-day activity, with the S&P and Dow both up 3%. Here and there we learn more about the virus or receive some good news about potential vaccines and treatment. There have been a few trading days with swings of 3–4%. 

Where will the stock market go from here?

My opinion—NOT my prediction—is that wall street is waiting for a catalyst. Will the Fed send out another round of stimulus payments? Will a company come out with a proven vaccine? Will the relationship with China improve or deteriorate? We can’t forget a big election is coming up. The stock market is looking for the next big thing and will react accordingly. The month of May brought some market stabilization and we’ve seen less volatility. We may be moving in a positive direction. Only time will tell. 

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