Market Update – August 8, 2020

Positive employment data led U.S. stocks higher this week, even in the face of continued tensions between the U.S. and China (this week: controversy over the TikTok app!). Congressional leaders and key administration officials continued negotiations on another government stimulus bill without reaching an agreement, casting some doubt on the prospects of the recovery. The NASDAQ Composite Index touched a new all-time high this week, as did the price of gold.

For the week, the S&P 500 Index gained 2.4% while the Dow Jones Industrial Average rose 3.8%. Year to date, the S&P is up 3.7% while the Dow has lost 3.9%.

Headlining this week’s data were two encouraging jobs reports:

  • The weekly unemployment claims report was significantly more promising than last week. Initial jobless claims fell to 1.2 million versus a consensus estimate of 1.4 million, marking the lowest number of first time claims since the pandemic began. Continuing unemployment claims declined to 16.1 million, against an estimate of 16.9 million.
  • July’s payroll report showed 1.8 million jobs were added to the economy while the unemployment rate dropped to 10.2% – both numbers outpacing expectations.

The sticking points about a potential new coronavirus economic aid package continue to center around a few key areas. Congressional Democrats desire a larger overall spending package, including significant sums for state and local governments and a continuation of the extra $600 per week unemployment benefit. Congressional Republicans and the White House want to pare back the overall support in both categories, as well as to include measures to insulate businesses from potential liability issues as the reopening accelerates. Markets seem to be waiting patiently for an agreement, but if one does not materialize, a short-term pullback from rising stock prices becomes much more likely.

Both the NASDAQ and gold spot prices broke through to record highs this week. Does this mean that we will look to exclusively build portfolios around tech stocks and the yellow metal? No. While we do have exposure to both segments – to tech companies via our suite of stock funds and gold through indirect positions in gold mining and operations companies – we continue to practice our key disciplines of asset allocation and global diversification. Using this approach, you’ll never have as high of performance as the best-performing asset class, nor as low as the worst-performing asset class. But it is our strong belief that this approach is better than just chasing the most recent hot performers, as a diversified approach seeks to reduce overall risk while still affording the opportunity for investment return.

As we continue to navigate through the pandemic, our commitment remains to be here for you each step of the way. We invite you to join a live webinar, Leading Through Crisis: Charitable Giving During the Pandemic on August 13 at noon ET. We will discuss the evolving needs of charities and financial strategies available to make an impact. Please register here.

Nathan Mersereau will continue posting short videos to provide timely insights and advice. We will post links to Nathan’s video updates across all of our social media channels.

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