August 28, 2020 Weekly Market Update. Nasdaq jumped +3.39% followed by the S&P 500 Index +3.26% and the Dow Jones Industrial Average +2.59% on higher inflationary goals by the Fed of above 2%, coronavirus vaccine progress and continued expectation of additional government support to aid the economic recovery. From a more subtle perspective, COVID-19 is driving changed behavior to where e-commerce sales as a percentage of total retail sales to reach a new peak (21%), over two times the level seen in 2010. Also, with mortgage rates hovering around all-time lows, new home sales jumped another +13.9% in July, the best since December 2006; mortgage applications for home purchase also continue to run some 33% above levels a year ago.
August 22, 2020 Weekly Market Update. The Nasdaq led the major U.S. equity indices gaining +2.65% followed by the S&P 500 +0.72%; the Dow Jones Industrial Average finished flat on the week. However, the breadth of the rally has been a narrow one, driven mostly by fan favorite mega-cap tech stocks, causing worries of a bubble. For example, the percentage of S&P stocks trading above their 200-day moving average fell from 68% at the market's June peak to just 54% at the end of July. Goldman Sachs, however, just recently hiked its year-end target on the S&P 500 to catch up with the historic rally that pushed the market over its record; yet, the bank warned that the U.S. election poses a significant risk to this call. The U.S. capital markets were also boosted by some monster earnings releases by big box retailers of the likes of Walmart & Target, both of which crushed 2nd quarter estimates with strong same-store-sales and e-commerce.
August 15, 2020 Weekly Market Update. The Dow Jones Industrial Average rose +1.81% this week to lead the U.S. equity markets followed by the S&P 500 Index +0.64% and the Nasdaq +0.08%. Insofar as negotiations between Republicans and Democrats for the fifth coronavirus relief package remain at an impasse, Trump has taken his own initiative by signing an executive action for $300 extra weekly unemployment (with the option of the state to kick in $100), along with a few other assistance actions ranging from helping out renters, student loans and payroll tax. The economy is showing some glimpses of recovery with initial jobless claims last week falling lower than expected to 963,000; the past twenty weeks of jobless claims has been in excess of 1 million. Meanwhile airline travel is also showing revival signs as the TSA screened more than 800,000 passengers last Sunday (airlines are also adding back some flights). With two consecutive quarters of GDP declines, the economy is in a recession yet the unsurpassed stimulus, relief packages and assistance has offset much the pain for large public companies. The most recent (previous) recession was Dec 2007-June 2009 where equities peaked in early October 2007, two months before the start of the recession, and bottomed on March 9. 2009. The S&P 500 had jumped by +36% before the official expiration of the recession on June 30, 2009. This economic dip turned out to be a U-shaped recovery. If in June 2009, you had thought you had already missed out on those gain then you would have been incorrect, as the S&P rallied another +44% over the course of the next two years.
August 8, 2020 Weekly Market Update. For the week, the equity markets posted strong results with the Dow Jones Industrial Average +3.80%, the Nasdaq +2.47% and the S&P 500 Index +2.45% on news Fed stays course with "whatever it takes...", better than expected earnings and ebullient investor sentiment. Case in point a recent Natixus Survey showed results indicating investors on average are expecting 12% return annually from the stock market while at the halfway point for the 2nd quarter earnings there were 215 S&P companies beating expectation, 37 missed and 2 that matched. However, the market continues to be powered by 5 stocks (Apple, Microsoft, Amazon, Google and Facebook) that now make up nearly 40% of the R1000 Growth index.
August 1, 2020 Weekly Market Update. The S&P 500 Index gained +1.73% and the Dow Jones Industrial posted a slight loss of -0.16% on the week. The discounting mechanism nature of the equity markets continues to have stocks rise sharply in anticipation of future improvement on the economic and earnings front. However, a good part of the market run-up has been led by the top five stocks by market cap (Apple, Microsoft, Amazon, Google and Facebook), now make up nearly 24% of the S&P 500. That means 1% of the stocks—measured in simple, equally-weighted terms—now practically make up their own quartile in market cap terms. That is significantly higher than the prior 2000 peak of about 18%. The chosen method of getting capital working in this lofty valuation market for the firm is defined outcome ETFs where we capture certain percentages of the market rally upside while having loss buffers between -9 and -30%. Unemployment claims (1.4M) ticked up again and the annualized -32.9% decline in second quarter GDP far exceeded any prior reading. However, consumption rose +5.6%, a figure that was certainly boosted by the COVID-19 unemployment check of an extra $600 a week; that extra money is now expired going forward until Congress can reach a new agreement.
August 22, 2020 Weekly Market Update. The Nasdaq led the major U.S. equity indices gaining +2.65% followed by the S&P 500 +0.72%; the Dow Jones Industrial Average finished flat on the week. However, the breadth of the rally has been a narrow one, driven mostly by fan favorite mega-cap tech stocks, causing worries of a bubble. For example, the percentage of S&P stocks trading above their 200-day moving average fell from 68% at the market's June peak to just 54% at the end of July. Goldman Sachs, however, just recently hiked its year-end target on the S&P 500 to catch up with the historic rally that pushed the market over its record; yet, the bank warned that the U.S. election poses a significant risk to this call. The U.S. capital markets were also boosted by some monster earnings releases by big box retailers of the likes of Walmart & Target, both of which crushed 2nd quarter estimates with strong same-store-sales and e-commerce.
August 15, 2020 Weekly Market Update. The Dow Jones Industrial Average rose +1.81% this week to lead the U.S. equity markets followed by the S&P 500 Index +0.64% and the Nasdaq +0.08%. Insofar as negotiations between Republicans and Democrats for the fifth coronavirus relief package remain at an impasse, Trump has taken his own initiative by signing an executive action for $300 extra weekly unemployment (with the option of the state to kick in $100), along with a few other assistance actions ranging from helping out renters, student loans and payroll tax. The economy is showing some glimpses of recovery with initial jobless claims last week falling lower than expected to 963,000; the past twenty weeks of jobless claims has been in excess of 1 million. Meanwhile airline travel is also showing revival signs as the TSA screened more than 800,000 passengers last Sunday (airlines are also adding back some flights). With two consecutive quarters of GDP declines, the economy is in a recession yet the unsurpassed stimulus, relief packages and assistance has offset much the pain for large public companies. The most recent (previous) recession was Dec 2007-June 2009 where equities peaked in early October 2007, two months before the start of the recession, and bottomed on March 9. 2009. The S&P 500 had jumped by +36% before the official expiration of the recession on June 30, 2009. This economic dip turned out to be a U-shaped recovery. If in June 2009, you had thought you had already missed out on those gain then you would have been incorrect, as the S&P rallied another +44% over the course of the next two years.
August 8, 2020 Weekly Market Update. For the week, the equity markets posted strong results with the Dow Jones Industrial Average +3.80%, the Nasdaq +2.47% and the S&P 500 Index +2.45% on news Fed stays course with "whatever it takes...", better than expected earnings and ebullient investor sentiment. Case in point a recent Natixus Survey showed results indicating investors on average are expecting 12% return annually from the stock market while at the halfway point for the 2nd quarter earnings there were 215 S&P companies beating expectation, 37 missed and 2 that matched. However, the market continues to be powered by 5 stocks (Apple, Microsoft, Amazon, Google and Facebook) that now make up nearly 40% of the R1000 Growth index.
August 1, 2020 Weekly Market Update. The S&P 500 Index gained +1.73% and the Dow Jones Industrial posted a slight loss of -0.16% on the week. The discounting mechanism nature of the equity markets continues to have stocks rise sharply in anticipation of future improvement on the economic and earnings front. However, a good part of the market run-up has been led by the top five stocks by market cap (Apple, Microsoft, Amazon, Google and Facebook), now make up nearly 24% of the S&P 500. That means 1% of the stocks—measured in simple, equally-weighted terms—now practically make up their own quartile in market cap terms. That is significantly higher than the prior 2000 peak of about 18%. The chosen method of getting capital working in this lofty valuation market for the firm is defined outcome ETFs where we capture certain percentages of the market rally upside while having loss buffers between -9 and -30%. Unemployment claims (1.4M) ticked up again and the annualized -32.9% decline in second quarter GDP far exceeded any prior reading. However, consumption rose +5.6%, a figure that was certainly boosted by the COVID-19 unemployment check of an extra $600 a week; that extra money is now expired going forward until Congress can reach a new agreement.