Markets, Economy

Weekly Kickstart (08/10/2020-08/14/2020)

8/10/20 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 2.45 percent to 3,351.28. That left the benchmark index up 3.73 percent 2020-to-date, and just 1.03 percent below the all-time closing high. Despite another week passing without Congress coming to an agreement on the next coronavirus relief package, equities rallied every single day during the past five trading sessions. Optimism that some sort of deal will eventually be reached likely helped buoy stocks last week, as did generally better-than-forecast economic data and a continued moderation in the “second wave” of COVID-19. Regardless, the relentlessness of the rally lately has been significant, and the S&P 500 has even managed to rise for five of the past six weeks for a gain of 11.37 percent. That is more than two standard deviations above the average 6-week gain experienced by the S&P 500 since 1950, but by itself not much of a contrarian indicator.

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In fact, when looking at other times when the broad index rose by at least this much during the past 70 years, the S&P 500 continued higher 73 percent of the time during the following six weeks for an average gain of 2.64 percent. This is clearly another example of how strength tends to beget strength in the stock market. However, past performance does not guarantee future returns, and there are indeed many potential volatility catalysts for the markets still to overcome in the near-term. What matters most is that investors are able to refrain from making panic decisions when a selloff does occur. Moreover, those who managed to stay calm throughout 2020 have likely been able to benefit greatly from the S&P 500’s 49.78 percent surge off of the March low. Many 401(k) participants encouragingly fall into this camp, as evidenced by updated EBRI data which showed that the average account balance for these retirement-focused investors is up 5.5-11.3 percent year-to-date. Of course remaining calm while markets tumble is not exactly easy, especially for those with an allocation mix that is inappropriate for their unique situation, e.g. nearness to retirement, risk tolerance, etc. Moreover, if the mere thought of some sort of market correction is causing you to lose sleep at night then your exposure to stocks may be too high. Periodic reviews of your positioning can help identify these potential portfolio imbalances ahead of time rather than waiting until the market has already moved against you and your options feel much more limited. Additional assistance is available by consulting with a professional financial advisor and as always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that the nation’s trade deficit narrowed, consumer credit demand rebounded, gauges of business activity improved, joblessness fell to a 4-month low, nonfarm payrolls rose by more than anticipated, and the number of Americans collecting unemployment benefits continued to decline. As for the negatives, home purchase applications fell, corporate layoff announcements picked up, and both public- and private-sector construction spending unexpectedly declined. This week the pace of economic data slows down but there are still a few important reports on manufacturing, productivity, consumers, small business, and inflation scheduled to be released.

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What To Watch:

Monday

  • JOLTS 10:00 AM ET

Tuesday

  • NFIB Small Business Optimism Index 6:00 AM ET
  • PPI-FD 8:30 AM ET
  • Mary Daly Speaks 12:00 PM ET
  • 3-Yr Note Auction 1:00 PM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • CPI 8:30 AM ET
  • Eric Rosengren Speaks 10:00 AM ET
  • Atlanta Fed Business Inflation Expectations 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • Robert Kaplan Speaks 11:00 AM ET
  • 10-Yr Note Auction 1:00 PM ET
  • Mary Daly Speaks 3:00 PM ET
  • Robert Kaplan Speaks 6:00 PM ET

Thursday

  • Jobless Claims 8:30 AM ET
  • Import and Export Prices 8:30 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • 20-Yr Bond Announcement 11:00 AM ET
  • 30-Yr TIPS Announcement 11:00 AM ET
  • 30-Yr Bond Auction 1:00 PM ET

Friday

  • Retail Sales 8:30 AM ET
  • Productivity and Costs 8:30 AM ET
  • Industrial Production 9:15 AM ET
  • Business Inventories 10:00 AM ET
  • Consumer Sentiment 10:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, EBRI, FRBSL

Post author: Charles Couch

Disclosures