Markets, Economy

Weekly Kickstart (08/17/2020-08/21/2020)

8/17/20 8:00 AM

iStock-626627280.jpgStocks continued higher last week, as the S&P 500 rose by 0.64 percent to 3,372.85. That left the benchmark index up 4.40 percent 2020-to-date, and just 0.39 percent below the all-time closing high. For some additional perspective, last Thursday was the 100th trading day since the S&P 500 bottomed in late March and during this period the broad index has surged by roughly 50 percent. That is the largest 100-day rally in 87 years. The tech-heavy NASDAQ that has benefited greatly from the pandemic-induced work-from-home push has similarly climbed by almost 60 percent since its March bottom, the 3rd biggest 100-day gain on record behind only the runs seen during the dot-com bubble. In some ways the recent surge in the stock market is not too surprising given how severe the selloff was that preceded it, but there is also no shortage of rally skeptics at the moment.

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For example, only 30 percent of investors in the latest AAII survey said that they expect stock prices to generally rise in value over the next six months. Although that is the highest reading in a month it is still the 23rd consecutive weekly print below the long-term average and much lower than what has typically been seen in the past when major indices were near record highs. Further, a supplemental AAII survey last week revealed that 64 percent of individual investors believe that “stocks are overvalued, and valuations are too optimistic.” That is a sharp contrast to the sentiment displayed in the latest National Association of Active Investment Managers poll which suggests that equity exposure is now above 100 percent long even though there are still plenty of potential volatility catalysts for the markets to overcome in the near-term. Does all of this mean some sort of pull back is imminent? Not necessarily, but such conditions do provide yet another reason to regularly review your positioning and make sure it is properly aligned with your risk tolerance, nearness to retirement, and other unique variables. This routine portfolio “maintenance” can make it a lot easier to refrain from panicking when a selloff occurs, and in turn more likely to participate in those “best days” that, as this year’s price action has again demonstrated, are often responsible for a significant portion of the gains in the market.

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To recap a few of the things we learned about the economy last week, there were no noteworthy negative data releases. As for the positives, home purchase applications rose, inflation pressures continued to stabilize, industrial production firmed, capacity utilization rebounded, productivity surged, consumer sentiment ticked higher, core retail sales growth exceeded forecasts, and the number of Americans making first-time claims for unemployment benefits fell below 1 million for the first time since March. This week the pace of economic data remains slow but there are still a few important reports on manufacturing and housing scheduled to be released, along with the potentially market-moving minutes from the last FOMC meeting due out on Wednesday.

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What To Watch:

Monday

  • 3-Yr Note Settlement
  • 10-Yr Note Settlement
  • 30-Yr Bond Settlement
  • Empire State Mfg Survey 8:30 AM ET
  • Housing Market Index 10:00 AM ET

Tuesday

  • Housing Starts 8:30 AM ET
  • E-Commerce Retail Sales 10:00 AM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • 20-Yr Bond Auction 1:00 PM ET
  • FOMC Minutes 2:00 PM ET

Thursday

  • Jobless Claims 8:30 AM ET
  • Philadelphia Fed Business Outlook Survey 8:30 AM ET
  • Leading Indicators 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • 2-Yr Note Announcement 11:00 AM ET
  • 5-Yr Note Announcement 11:00 AM ET
  • 7-Yr Note Announcement 11:00 AM ET
  • 30-Yr TIPS Auction 1:00 PM ET
  • Fed Balance Sheet 4:30 PM ET
  • Money Supply 4:30 PM ET

Friday

  • PMI Composite Flash 9:45 AM ET
  • Existing Home Sales 10:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, BIG, AAII, NAAIM, FRBSL

Post author: Charles Couch

Disclosures