🤔 Stocks rally. Economy suffers.

Monday, May 11, 2020 by Robinhood Snacks | Disclosures

The economy vs. the stock market

Last Week’s Market Moves
Dow Jones
24,331 (+2.56%)
S&P 500
2,930 (+3.50%)
9,121 (+6.00%)
$9,994 (+0.71%)
10-Yr US Treasury

Hey Snackers,

In case live oral arguments aren't enough to make you ditch Netflix for the Supreme Court's buzzy new streaming service, maybe the drama will: mystery abounds after a spicy debate on the constitutionality of robocalls was interrupted by a loud toilet flush. Doo diligence on a whole new level.

Stocks soared last week, and the Nasdaq recovered all its 2020 losses despite the worst unemployment report in almost 90 years. More on that below.

On the pod: Tinder's user growth slipped for the 1st time ever. Now it's got to DTR with the corona-conomy — more in our 15-minute Snacks Daily podcast.

1. 20.5M Americans lost their jobs in April, but the stock market rallies — what gives?

Honestly horrifying... The April Jobs Report. A jaw-dropping 20.5M Americans lost their jobs last month, bringing the unemployment rate to 14.7%. Just a year ago it was 3.6%. And we thought the 870K jobs we lost in March was bad...

  • It's the worst unemployment rate since the Great Depression in 1933, when unemployment hit 25% — it's also the greatest job loss (by far) since the gov began tracking monthly job gains/losses in 1939.
  • 8.7M jobs were lost during the '08 financial crisis — in the decade after that, US employers added 22.8M jobs to the economy. The COVID-19 crisis wiped out ten years of job gains in just a month. And probably more...
  • People are only considered unemployed when they're actively searching for a new job — many aren't right now, partly because many companies aren't hiring and the stay-at-home orders. If you include these people, the unemployment rate is probably more like 23%.

But Wall Street is popping bottles... The stock market saw the unemployment numbers and barely flinched:

  • The Nasdaq recovered all its 2020 losses and is up over 30% since its low on March 23 — the tech-heavy index is now higher than its December 2019 value.
  • The S&P 500 — the index which measures the stock prices of the largest 500 US companies — has soared 31% since March 23 (so has the Dow).

The stock market isn't the economy... And stock prices don't necessarily reflect economic health (as we're seeing today) — they reflect future expectations.

  • The economy is like a soccer player who just broke his/her leg, and the stock market is like fans hoping the player will heal quickly and win matches.
  • Because of its forward-looking nature, the market can recover faster than the economy. The current rally reflects optimism about health-related progress, government intervention, and the resilience of big tech companies (which affect market indexes heavily because of their large market values).
  • TBD if the optimism is justified — it could take a while for jobs (and the economy) to bounce back to game shape. Oh and remember the trade war?
  • You don't look like your voice.... Even with podcast listening down, Spotify grew its paid subscribers by 31% in the 1st quarter. Now the Swedish audio streamer is coming for your eyes: Spotify is testing video podcasts in its app, starting with two major YouTube stars. Reportedly, the plan is to expand video to many more podcasts — with its 286M paying subscribers, Spotify could snag viewers away from Google-owned YouTube.

  • Spinning away the "quarantine 15"... Peloton shares hit a record high since the at-home-spin company reported explosive demand. Sales of Peloton's $2.2K spin bikes and $4.3K treadmills were up 66% for the quarter, and paid subscribers nearly 2X'd to 886K. Oh, and 176K people who don't own any Peloton hardware are also paying $19/month for fitness classes on the app. All that extra sweat led to a record-breaking 44M Peloton workouts over just 3 months.

  • February 2020 seems like forever ago... Back then, Uber expected to be profitable by year's end. Reality: Uber lost $2.9B last quarter, a massive L (even for Uber's famous cash-burns). Even though gross bookings for Uber Eats soared 54%, Uber's ride-hail biz plummeted 80% in April. But around two-thirds of Uber's quarterly loss was caused by its tanking investments in Asian ride services Didi and Grab.

  • Baby Yoda eating Mickey Mouse churros (alone)... Disney's profit fell 91% this quarter — Its Parks division suffered an un-magical 10% sales dip (parks have been shut since March 16). Disney's cable networks (like ESPN) are suffering on zero live sports, depressed ad sales, and accelerated cord-cutting. As a sour cherry on top of the corona-loss sundae, the release of studio blockbusters like Mulan had to be put on hold.

What else we’re Snackin’
  • Achieve: 8 tips to beat distractions while you're WFH (it's possible).
  • Overcome: Gratitude in tough situations protects our mental health just like our immune systems protect our physical health — a tool for resilience.
  • Cut: Bitcoin’s mining reward is about to be cut in half — what investors should know about "The Halvening” (not a horror movie).
  • Lead: How focusing on the "why" behind your ideas can help you communicate better (and gain more support) than the "what" and "how."
  • Visualize: Jeff Bezos' wealth, visualized — keep scrolling for the unfathomable scale of it (it's a lot of scrolling).
  • Work: Tips for graduating seniors to find jobs during tough economic times (and how colleges can help).
Snacks Daily Podcast

Quarantining: Hard on dating. Bumble's had video-dating for a year — but Match Group's Tinder won't get that for months. So we jumped into the earnings report on what else Tinder's cooking up for distanced summer love...

Tune into our digestible pod to learn about Tinder's plans to keep the spark alive virtually (spoiler: "Trivia night").

This Week

Disclosure: Authors of this Snacks own shares of Uber, Sony, Disney, and one Bitcoin

ID: 1181603

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