• Chris Simpson

Weekly Market Update May 29, 2020

Things are starting to return to normalcy at least as far as the markets are concerned. The S&P 500 rose above its 200-day moving average this week, the Dow Jones broke 25,000 for the first time since March and the NASDAQ is now in the green for the year.

Most of this success is due to the fact that local businesses are starting to open and operate again (usually under mask-wearing conditions but it’s definitely progress)! One of the businesses that announced they’ll be opening back up was Florida’s Walt Disney World, who plans to reopen July 11th. It’s incredible that Disney World has been closed for several weeks, especially considering that they’ve only ever closed 7 times total in their history (usually for hurricanes and then on 9/11).

Let’s take a look at some of the biggest business updates from the week.

Instagram Announces Payment For Influencers

Mark Zuckerberg is on the move again. Last week they launched Facebook Shops which are expected to compete with Amazon and Shopify. This week, they announced that Instagram (owned by Facebook) influencers will have the ability to earn money from ads that go on their IGTV videos.

Why is this news?

Social media companies are constantly in a state of flux trying to figure out the next big thing. By offering to give content creators a share of their ad-revenue pie, Instagram is taking a direct shot at Google-owned YouTube. If content creators can make more money posting to Instagram, that’s where they will flock.

Facebook already does about $20 billion in ad revenue and is now poised for two big upgrades. Their stock is up 50% since March.

Advantage and Hertz File For Bankruptcy

It seems like every week there is a new bankruptcy. Usually, these headlines are reserved for retailers, the fashion industry, or your childhood toy store. However, this week had a different industry in mind.

Rental car companies Advantage and Hertz both filed for bankruptcy. This is the third bankruptcy for Advantage in the past 12 years (they filed in 2008 and 2013). Although this time Corona ravaged their businesses, maybe it’s time that they rethink their business model in general.

Although the slow down of travel in the economy definitely hurt both businesses, increased competition could be another factor. Peer-to-peer car renting apps like Turo have been growing in popularity over the past few years for being slightly cheaper, easier, and less paperwork.

Elon’s Shuttle Launch

The biggest news from this week ended up not really being news. Elon’s company SpaceX was supposed to send a manned mission to the International Space Station. This would’ve marked:

● The first time a private company sent men into space.

● The first time that astronauts launched from U.S. soil in almost a decade. Apparently they’ve just been launching from Russia for the past couple of years (an arrangement that costs NASA $80 million per seat).

Unfortunately, the launch was delayed due to inclement weather which is probably for the best. As someone once said, “They won’t remember a delayed launch. They will, however, remember a failed launch.”

States start reopening their economies

Just in time for Summer, most states are taking concrete steps towards reopening their economies. We bet that you’ve seen evidence of this in your town. This small win is backed by evidence in the form of:

● Requests for directions on Apple Maps which have returned to January levels.

● The TSA reported the highest number of screenings since March and passengers per flight has quadrupled since April.

What does this mean?

Most people believe that it’s a good time to start reopening things as long as it’s done in a safe cautious way. It’s worth noting that the second wave of the 1918 Spanish Flu killed significantly more people than the first wave. Stay safe and be cautious!

That’s it for this week -- Join us next week for another market update.

Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Sierra Ridge Wealth Management is not an affiliate of NEXT Financial Group Inc. This material is not intended as an offer or solicitation for the purchase or sale of a security or an other financial instrument. Past performance does not guarantee future performance.

All the views expressed are those of Chris Simpson and not those of Sierra Ridge Wealth Management or NEXT Financial Group Inc.

The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy.

The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

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