Renewed hopes for additional fiscal relief led U.S. stocks to their best weekly performance since July. The Dow Jones Industrial Average year-to-date return number turned positive during Friday’s trading, while the S&P 500 Index pushed further into positive territory for the year. Even though our economic recovery is underway and third-quarter GDP is expected to show a remarkable turnaround from the depths of the pandemic, potential threats are still lurking.
For the week, the S&P 500 Index closed up 3.84% while the Dow Jones Industrial Average advanced 3.27%. Year to date, the S&P is up 7.63% while the Dow is up 0.17%. First-time unemployment claims fell again this week; however, it was a less dramatic drop than expected. Conversely, continuing unemployment claims fell more than expected to 11 million. The drumbeat of calls for additional government support of the economy continued this week, as Federal Reserve Chairman Jerome Powell and his European Central Bank counterpart President Christine Lagarde both stressed that more help is necessary to regain pre-pandemic levels of economic strength. Maneuvering on the issue of additional government relief between the Trump administration and House Speaker Nancy Pelosi persisted this week, as both sides vacillated between negotiating on a new bill and attacking each other in the media.
Stocks appear to be anticipating at least one more round of fiscal relief, regardless of the election outcome in November. While it appears unlikely that the Trump administration and Congress will agree to a package before the election, we believe another relief measure is highly likely once the election is settled: either a compromise plan if President Trump is re-elected, or a much larger spending package under a President Biden.
The latest GDPNow model estimate for third-quarter real GDP growth released this week by the Federal Reserve Bank of Atlanta was 35.3% (annualized). If this growth is indeed realized, it would represent a remarkable turnaround from the abysmal second-quarter results.
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.
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