Market Update – July 18, 2020

Continued positive economic data and preliminary results from Covid-19 vaccine trials propelled U.S. stock indices higher this week. Internationally, stronger than expected evidence of a recovery in Europe and China aided the week’s rally. Higher numbers of virus cases tempered the enthusiasm, however, as California joined the ledger of states that have paused or rescinded reopening plans.

For the week, the S&P 500 Index gained 1.3% and the Dow Jones Industrial Average rose 2.3%. Year to date, the S&P is down 0.2% while the Dow has declined 6.5%. We continue to closely track unemployment data as a barometer of the health of the labor market. Initial jobless claims totaled 1.3 million, down slightly from last week. Continuing claims fell more substantially, to 17.3 million from last week’s 18.1 million. While these numbers are promising, the obvious threat comes from the potential pausing or reversal of states’ reopening plans. California announced the re-closing of several indoor activities and stated that the upcoming school year will begin virtually in Los Angeles and San Diego. Golden State workers not only face renewed threats to their positions as businesses shut to comply with government orders, but could potentially be forced to choose between returning to work and staying at home to care for remote-learning children.

Retail sales in the U.S. rose more than expected in June, led by strong car, gasoline, and restaurant purchases. New home construction projects were started at a 17% higher rate in June than May, likely due to an extremely low inventory of existing homes for sale as well as ultra-low mortgage rates. As an example, the 30-year fixed mortgage rate fell below 3% for the first time – offering a historic opportunity for both home buying and refinancing.

Shifting focus overseas, the Eurozone appears to be on their road to recovery, as exhibited by their significantly lower number of coronavirus cases, rising retail sales and stronger than expected industrial production levels. Negotiating a clean resolution to Brexit by the end of the year remains vital to the region’s fortunes. In China, GDP growth was higher than expected in the second quarter, stoking optimism for their quick recovery. We continue to emphasize inclusion of international markets in client portfolios to provide diversification to sky-high U.S. asset prices, and to seek higher growth potential as developing countries realize productivity gains that boost their economic growth.

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.