Monthly Archives: August 2020
S&P 500 on Track for Best Month Since April
Market Data as of Week Ending 08/28/2020 unless noted otherwise.
EQUITIES
U.S. stock prices advanced again last week as the S&P 500 Index is on track to record it’s best month since April. Large company stocks generally outperformed their small and medium sized peers and growth stocks outperformed value. Communication services, information technology, financials, and materials outperformed and more than offset weakness in the utilities, health care, real estate, and energy sectors. Developed foreign stocks in Europe and Asia lagged U.S stocks while Emerging Market stocks outperformed developed foreign markets.
BONDS
U.S. Treasury yields rose this past week as the Federal Reserve announced substantial changes to their interest rate policy. The Fed will no longer raise rates based on surveys of expected inflation and instead will wait until inflation is realized. This change will effectively allow for periods above its 2% inflation goal to offset periods below the target. High yield (below investment grade) corporate bonds were the top performing segment followed by investment grade corporate bonds. Investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5.3%.
MACROECONOMIC DATA
Economic data was largely overshadowed by the Fed’s announcement of changes to their interest rate policy framework. Initial unemployment claims declined from the prior week to just over 1.0 million. The number of unemployed Americans filing continuing claims fell and reached a new low (14.5 million) that has not been observed since early April. Leaders in France, Spain, and Italy appeared to reject the need for nationwide lockdowns to reduce what may be a second wave of coronavirus infections. Meanwhile, German business sentiment strengthened for the fourth consecutive month, signaling a strong rebound in economic activity in the third quarter.
S&P 500 Index Records Fastest Recovery on Record
Market Data as of Week Ending 08/21/2020 unless noted otherwise.
EQUITIES
U.S. stock prices were generally higher last week as the S&P 500 Index recorded the fastest recovery on record. It only took 126 trading days for the index to reach its prior peak which was over 10 times as fast as the average historical rebound. Both size and style were outsized factors as large growth stocks outperformed small value stocks by more than 6.5%. The energy, financials, industrials, and utilities sectors ended the week in negative territory. Information technology, consumer discretionary, and communication services were the top performing sectors. Developed foreign stocks in Europe and Asia lagged U.S stocks while Emerging Market stocks outperformed developed foreign markets.
BONDS
U.S. Treasury yields declined this past week as demand returned to higher quality and longer duration bonds. Long-term treasury bonds were the top performing segment followed by investment grade corporate bonds. While near term demand for credit risk may have declined, investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5.5%.
MACROECONOMIC DATA
Initial unemployment claims unexpectedly rose this week to 1.1 million. However, the number of unemployed Americans filing continuing claims fell more than expected, and reached its lowest number (14.8 million) since early April. July housing data was encouraging with increases in housing starts and permits while existing home sales rose more than expected and surpassed their best level since December 2006. Economic readings in Europe and Asia were mostly negative as Europe reported worse than expected PMI data and Japan announced that second quarter GDP declined by nearly 8%.
Unemployment Claims Declined This Week and Fell Below 1 Million for the First Time Since the Pandemic Began
Market Data as of Week Ending 08/14/2020 unless noted otherwise.
EQUITIES
U.S. stock prices were generally higher last week as economic trends demonstrate support for a sustained recovery. Analysts have increased S&P 500 earnings estimates for calendar year 2020 following steady declines that reached a bottom in July. There was no clear trend in performance based on company size; however, value stocks outperformed growth, regardless of company size. Value stocks outperformed despite negative returns in the real estate and utilities sectors. More cyclical sectors such as industrials, energy, materials, and consumer discretionary were the top performing sectors. Developed foreign stocks in Europe and Asia outperformed U.S stocks while Emerging Market stocks lagged developed foreign markets.
BONDS
U.S. Treasury yields rose again this past week. Investment grade corporate bonds lagged despite the yield advantage and favorable economic trends. Treasury bonds were the top performing segment as corporate bonds dealt with higher yields. While near term demand may have declined, investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5.5%.
MACROECONOMIC DATA
Initial unemployment claims declined this week and fell below 1 million for the first time since the pandemic began in March. Other positive economic data included core inflation which rose 0.6% from the prior month, the biggest jump in almost three decades. On an annual basis, core inflation measured 1.6%, a four-month high, following 1.2% in June. Economic readings in Europe and Asia were mixed but stock prices were supported by a weaker US dollar and improved outlook that stimulus measures may accelerate the economic recovery.
U.S. Treasury Yields Rose This Past Week
Market Data as of Week Ending 08/07/2020 unless noted otherwise.
EQUITIES
U.S. stock prices advanced again last week as the economy is showing signs of a durable recovery and coronavirus cases have been trending down. Small and medium sized companies generally outperformed large companies and growth stocks lagged, regardless of company size. All major economic sectors delivered positive returns with notable gains in industrials, financials, and industrials. While most sectors have recovered, those three along with utilities and real estate, remain in negative territory on a year-to-date basis. Developed foreign stocks in Europe and Asia lagged U.S stocks while Emerging Market stocks lagged developed foreign markets.
BONDS
For the first time in several weeks U.S. Treasury yields rose this past week. High yield corporate bonds were one again the best performing asset class, followed by investment grade corporate bonds. Despite the increased demand, investment grade corporate bonds are yielding approximately 1.9% and high yield corporate bonds are yielding more than 5%.
MACROECONOMIC DATA
Initial unemployment claims declined this week to 1.2 million, but more importantly, the Labor Department reported a better than expected addition of 1.76 million jobs in the month. As such, the unemployment rate declined from 11.1% to 10.2%. Other positive economic data included manufacturing data as July factory orders rose more than expected and the ISM manufacturing index rose to 54.2 last month, up from a June reading of 52.6 (a reading above 50 signals expansion).
Facebook, Amazon, Apple, and Alphabet Continue to Lead the Market
Market Data as of Week Ending 07/31/2020 unless noted otherwise.
EQUITIES
BONDS
U.S. Treasury yields declined again this past week. High yield corporate bonds were the best performing asset class, followed by investment grade corporate bonds. Despite the increased demand, investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5%.
MACROECONOMIC DATA
Initial unemployment claims rose again from the previous week to 1.4 million and there are approximately 17 million Americans claiming ongoing unemployment benefits. As expected, the U.S. reported a significant decline in second quarter GDP. The $1.8 trillion deficit was attributed mostly due to declines in consumer expenditures and private investment.