September 1, 2020
This month saw the Nasdaq and S&P 500 achieve new record closes and allowed the Dow to reverse all of 2020’s bear market losses to post only a slight year to date loss. The markets have been encouraged by an accommodative Federal Reserve, and the COVID-19 outbreak that appears to be moderating in the south which had been a domestic epicenter of new infections. There have also been encouraging developments in the race for a vaccine that have given the equities markets hope.
August payrolls data will be closely watched for signs the labor market is healing, as more displaced workers are finding employment. Hopefully, the unemployment rate can slip back below 10% although some estimate that around a quarter of the overall job loss may be permanent. That still leaves room for gradual improvement in the coming months.
Even with some slowing in July and August household spending, partially due to the interruption of federal income support, real consumer spending looks set to grow in the third quarter as more business reopen and welcome patrons.
The Nasdaq and S&P500 both rose more than 3% after Fed chair Jerome Powell introduced a significant change in the committee's interest rate policy. Longer-term interest rates stepped higher as the Fed will allow the economy to experience some inflation.
The Dow Jones Industrial Average now begins trading with 3 new components, Salesforce, Amgen, and Honeywell which will replace Exxon Mobil, Pfizer, and Raytheon. This often results in volumes on both the buy and sell sides for these stocks as funds make their adjustments to the new players.
Year to date the Dow remains slightly negative at 0.38%, while the S&P 500 and Nasdaq are both ahead 8.34%, and 31.24 % respectively. The 10-year Treasury is currently yielding 0.74%.
*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.