Market Update – August 1, 2020

U.S. stocks were mixed for the week, as investors continued to balance positive signs and negative news. The worst quarter for GDP growth in recorded history and an uptick in unemployment caused some to question the veracity of the economic recovery. But continued bright spots in housing data and some strong corporate earnings reports that exceeded expectations provided positive momentum late in the week. Determining a clear view of what’s next continues to be challenging in the midst of all the conflicting data.

For the week, the S&P 500 Index gained 1.7% while the Dow Jones Industrial Average fell 0.2%. Since March lows, the S&P is up 49.2% while the Dow has gained 45.1%. U.S. GDP shrank 9.5% from the first quarter to the second, which amounts to an annualized 32.9% drop. While almost unfathomably bad, the number was actually better than consensus expectations! We continue to believe that the worst is behind us and that the recovery is underway. However, the continued uncertainty surrounding states’ reopening plans and the disagreements between Congress and the White House on another economic stimulus package stand as major short-term roadblocks.

After several weeks of improving unemployment figures, this week’s report was less encouraging. Initial jobless claims increased slightly to 1.43 million, while continuing claims jumped significantly to 17 million. As state governments continue to interpret health data and make decisions between continuing or pulling back reopening plans, the road to low unemployment will remain bumpy.

Pending home sales (a measure of existing homes with a signed sales contract in place) jumped 16.6% from May to June, while sales of new single family homes increased 13.8%. Both results were well above expectations and continue to demonstrate the resilience of the housing market. Many corporate earnings announcements provided a boost to stock prices this week: Apple, Amazon, Facebook, Qualcomm, P&G, UPS, Mastercard, and PayPal stood out for excellent results. Of course, all of these companies are key holdings in the stock funds within our clients’ portfolios.

As we continue to navigate through the pandemic, our commitment remains to be here for you each step of the way. As always, please contact us with any questions about the economy and your financial plan.