The Dog Days are here! School is back in session, some in-person, some virtual. The virus continues to be present and the economy slowly is rebuilding while the markets continue to climb. Last week indexes finished slightly up. The Dow up 1.8%, S&P up 0.64%, and Nasdaq up 0.08%. The S&P began the week rising for it’s 7th straight session in the green and briefly passed the all-time high on Wednesday. The flat performance was a result of uncertainty with economic data, the latest virus patterns, and a second fiscal stimulus package that never was.
The S&P 500 index is close to record territory once again. The economy and the stock market seem far off. Thursday marked the 100th day since the market lows on March 23. The markets have rebounded 50% since then. A strong recovery for investors, while millions have lost jobs and over 160,000 Americans have lost their lives. Management reports on earnings calls have been surprised at the speed and scale of the demand rebound. Many companies expected a short lived drop, followed by a gradual recovery. Not so much the “snap-back” experienced.
It is encouraging that the U.S. has added back millions of jobs lost during the first wave. Last Thursday marked the first jobless claims report under 1 million since March. Also, from earnings calls, consensus views are pointing towards record breaking earnings next year. Strongly supported by interest rates, which continue to be favorable for the foreseeable future. Investor fears over companies falling into financial distress are offset by the Feds support of buying bonds and Congress spending on relief. Retail sales also rose in July 1.2% higher than June, setting a new all-time high, and another sign of recovery.
The Week Ahead
The equity markets will have their eyes on Washington in hopes of a new stimulus. On Thursday, unemployment claims will be reported and the hope is that a under 1 million trend goes on. Continuing unemployment claims are still above 15 million, however, this is much lower than the 25 million in May. Stress for parents remains as school openings have created more unrest than security. How the school year unfolds for parents will no doubt impact the workforce productivity. Some areas of the country have already started so watching closely for signs that reopening in person can be done safely is key.
At the end of the day, it is clear the markets and the economy are not one in the same. Very different directions, as reflected in year-to-date index performance; Dow down 2.1%, S&P up 4.4%, and Nasdaq up 22.8% through the close on Friday.
Have a safe week!
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