Markets, Economy

Weekly Kickstart (7/06/2020-07/10/2020)

7/6/20 8:00 AM

iStock-626627280.jpgThe market rally resumed last week, as the S&P 500 rose by 4.02 percent to 3,130.01. That left the benchmark index down just 3.12 percent 2020-to-date, and 39.89 percent above the March panic low. As for performance during the month of June, the S&P 500 climbed 1.84 percent. That was the third gain in a row and enough to result in the largest quarterly increase (+19.95 percent) since 1998. Looking ahead, only 22.15 percent of investors in the latest AAII survey said that they expect stocks to generally rise in value during the second half of 2020, the lowest reading since October of last year. Such “cautious optimism” is not too surprising following the significant run-up in valuations that has already occurred during the past 100 calendar days despite all the uncertainty still surrounding the coronavirus, U.S.-China trade relations, corporate earnings, the next stimulus package, and of course the November elections.

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August and September have also tended to be the worst months for equities in terms of performance, but for a perhaps more relevant historical perspective, in the last century whenever the S&P 500 rallied all three months in the second quarter, the average returns during the following 1-, 3-, and 6-month periods were +1.11 percent, +3.32 percent, and +7.95 percent, respectively. Performance was even better when looking only at Q2’s that experienced a gain similar to this latest quarter. Such statistics provide yet another example of how strength tends to beget strength in the stock market. However, past performance does not guarantee future returns, and the extreme events of 2020 have made finding any useful historical precedents very challenging. Further, with all of the earlier-mentioned potential volatility catalysts for the markets still to overcome in the near-term, many regular investors may want to continue to use rallies as opportunities to review their positioning and make sure it is properly aligned with their risk tolerance, nearness to retirement, and other unique variables. 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 (holiday-shortened) week, the positives included that home values continued to rise, pending home sales surged, manufacturing activity rebounded, consumer confidence stabilized, corporate layoff announcements moderated, small business hiring improved, joblessness decreased, and total employment in America rose by a record 4.8 million payrolls. As for the negatives, the nation’s trade deficit widened, mortgage purchase applications fell for the second straight week, construction spending unexpectedly declined, permanent job losses continued to climb, and first-time claims for unemployment insurance remained elevated. This week the pace of economic data slows down but there are still a few important reports on service sector activity, credit, employment, and inflation scheduled to be released.

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What To Watch:

Monday

  • PMI Services Index 9:45 AM ET
  • ISM Non-Mfg Index 10:00 AM ET

Tuesday

  • Raphael Bostic Speaks 9:00 AM ET
  • JOLTS 10:00 AM ET
  • Randal Quarles Speaks 1:00 PM ET
  • 3-Yr Note Auction 1:00 PM ET
  • Thomas Barkin Speaks 2:00 PM ET
  • Mary Daly Speaks 2:00 PM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET
  • Raphael Bostic Speaks 12:15 PM ET
  • 10-Yr Note Auction 1:00 PM ET
  • Consumer Credit 3:00 PM ET

Thursday

  • Jobless Claims 8:30 AM ET
  • Wholesale Trade 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • Raphael Bostic Speaks 12:00 PM ET
  • 30-Yr Bond Auction 1:00 PM ET

Friday

  • PPI-FD 8:30 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, AAII, FRBSL

Post author: Charles Couch

Disclosures