Market Update – September 5, 2020

Conflicting information about the COVID-19 vaccine timeline in addition to a sharp drop in tech stocks led major U.S. indices lower this week. Although the S&P 500 Index finished lower for the week, Monday closed out the best August performance for the index since 1986. Employment information took center stage – appropriate enough, as we celebrate Labor Day this weekend.

For the week, the S&P 500 Index fell 2.3% while the Dow Jones Industrial Average lost 1.8%. Year to date, the S&P is up 6.1% while the Dow is down 1.4%. Vaccine reports boosted stocks early in the week, as the FDA signaled that they would consider fast-tracking emergency use prior to completion of Phase 3 trials and the CDC began asking states to prepare to distribute vaccine doses by November 1. However, public health officials including Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, and Dr. Moncef Slaoui, chief scientific adviser to Operation Warp Speed, called that aggressive timeline into question on Thursday. This uncertainty seemed to concern markets, leading to accelerated sell-offs in stocks through the remainder of the week. Tech stocks fell further than other sectors, as many investors likely locked in profits from this year’s remarkable run-up.

Unemployment data released this week continued to indicate that the labor market is improving, even if it still faces an uphill climb to return to prepandemic strength. The August employment report showed an increase of 1.4 million jobs, in line with expectations – as the unemployment rate fell to 8.4% from July’s 10.2%. There was some controversy regarding weekly first-time unemployment claims: 0.9 million were reported as the seasonally adjusted number, while the unadjusted number remained above one million. Continuing unemployment claims continued their downward trend, falling to 13.3 million. Regardless of the Labor Department’s latest measurement criteria, the fact remains that too many people are still out of work, and the economy won’t be able to fully recover until the number of people claiming benefits and the unemployment rate fall dramatically lower.

While there still appears to be no consensus agreement on another coronavirus relief bill, Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi did informally agree to avoid a potential government shutdown at the end of September via the use of a short-term funding bill without the unrelated riders typically attached. While any virus relief legislation would need to be negotiated separately, at least the specter of a contentious shutdown before the election in November seems to have been put to rest.

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.

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.

You can follow us on YouTube, LinkedIn, Facebook and Twitter.