| Tuesday's Headlines 1. Global markets rally on economic optimism 2. The Fed forecasts 53% GDP drop 3. Greed takes over animal spirits 4. Personal finance anxiety is peaking Markets Closed
 Image courtesy Rainer Fuhrmann/EyeEm/Getty
Markets Today Global markets surged again today, with broad gains out of Europe and U.S. markets. In Europe, the Stoxx 600 hit a multi-month high as Germany and Italy show even more signs of economic reopening.
Economic recovery hopes remain high on these shores despite ongoing protests and some rioting across American cities. New York and Minneapolis extended their curfews as rioters caused widespread destruction overnight, and the president may invoke the Insurrection Act, allowing him to use federal troops to safeguard constitutionally protected civil rights.
There is volatility everywhere but the stock market, which continues to churn higher. The S&P 500 is up 40% from its late March lows, and nearly all sectors are firing. Financial, industrial, and manufacturing stocks continue to move higher, taking the baton from technology and healthcare, which have dominated returns.
All of this is happening in the face of historically bad economic news and projections, and as anxiety creeps higher among investors. This is challenging the natural state of our animal spirits in ways we've never dreamed of. Headlines:
 chart courtesy TradingView
GDP Set for Historic Plunge U.S. economic activity in the second quarter has been cut by more than half, according to the Atlanta Federal Reserve's GDPNow tracker. The GDPNow outlook is now showing a 52.8% decline, following recent manufacturing, production, and consumption reports.
chart courtesy Atlanta Fed  The Atlanta Fed anticipates personal consumption expenditures, which make up 68% of the nation's gross domestic product, to fall 58.1% in the April-to-June period. Gross private domestic investment, which accounts for 17% of GDP, is now projected to slide 62.6%. If unemployment stays high through 2020, both consumption and private investment will remain the biggest challenges to an economic recovery.  chart courtesy CNNBusiness
Greed Takes Over Stock investors are unmoved by the GDP plunge forecast, or just about anything else that would derail this rally under normal circumstances. We've shown you a lot of data points to support that, and CNN's Fear & Greed Index, which tracks money flows, options activity, stocks above their 52-week highs, and other metrics, shows that greed is driving the market, in a sharp shift from a month and year ago.
Since the Fear & Greed Index tracks overall market sentiment through money flows and technical indicators, it is capturing mostly institutional investor sentiment, since the big money moves markets.
On the individual level, our Anxiety Index, which tracks increased search interest around fear-based terms, is at record highs.  Anxiety Is High, but Not in the Stock Market The anxiety is not centered around market based fears but focused on personal finance related topics like bankruptcy, foreclosure, unemployment insurance, and liquidity. This split between the animal spirits of greed, driving stocks higher in the face of dire economic circumstances, and fear, causing investors and savers to try to protect themselves from personal financial danger, is a rare and precarious dynamic. It's hard to remain invested for the long term in the face of so many short-term headwinds.  Experienced Investors Are Concerned Those investors who have been around the block a few times, including during the great financial crisis, are pretty concerned. Our recent reader survey shows that older, wealthier investors who had money in the markets in 2008–09 are more concerned about what's happening today than they were back then. I'm one of them, and I feel the same way.
We are older, and we have more to lose, but we also know what happens when the Federal Reserve pulls out all stops and backs the capital markets.
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(chart courtesy YCHARTS)  Shares of Western Union are up by over 12% on news that the financial services firm is looking to acquire money transfer company MoneyGram. Shares of Equifax rose 7.5% after the credit reporting company announced a new partnership with Salary Finance. The two finance companies will help businesses improve the economic health of their staff.  Shares of Tiffany & Co. are down by 9% as the jewelry retailer's acquisition deal with luxury goods company LVMH is seeming less likely amid a tumultuous U.S. market. Newmont's share price fell by over 3.5% as the price of gold ended lower for a second straight session—bad news for the world's largest gold mining company. Word of the Day Animal SpiritsAnimal spirits was a term coined by the famous British economist, John Maynard Keynes, to describe how people arrive at financial decisions, including buying and selling securities, in times of economic stress or uncertainty. In Keynes's 1936 publication, The General Theory of Employment, Interest, and Money, he speaks of animal spirits as the human emotions that affect consumer confidence.  Image courtesy NYT
Today in History June 2, 1985: R.J. Reynolds Industries Inc. takes a deep breath and gobbles up Nabisco Brands Inc. in an acquisition valued at $4.9 billion, the largest takeover yet on record outside the oil industry. RJR buys Nabisco for $85 a share—a huge premium over the $60 share price only a month earlier. Three months later, Philip Morris buys General Foods.
The Wall Street Journal, June 3, 1985.
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Tuesday, June 2, 2020
Fear & Greed
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