WMU Script for August 17-21, 2020
WMU Script for August 17-21, 2020Hello, I am Jamie Hopkins, managing director of Carson coaching and this is the weekly market update video for the week of August 17-21st. Last week was a strong week for the market, with the S&P 500 posting a 0.8% positive return, bringing the year to date return up to 6.5 percent. Interestingly this also brought us an all-time high in the S&P 500 on August 18th, 2020. This also means we saw the shortest bear market in the post WWII era, just 32 days down and took 148 days to get back in the S&P 500 recovery. However, if you dive deeper into the numbers the story is now a full V shaped recovery – only 111 companies made all-time highs in August, as opposed to 160 in February. In fact, if you look at the recovery – what you see is if you back out information technology and consumer discretionary, which includes Amazon, the remaining stocks have actually posted a negative return. Right now the market and recover is being driven by the technology stocks more now than ever. However, it is not odd for the market to be driven by a few of the highest market cap stocks. Energy for instance continued its struggles for 2020 and did not have a good week, posting a negative 6.1 percent loss, and is still down almost 40 percent year over year as lower demand and international issues have pulled down production, prices, and sales at this point. Interestingly it was not long ago that EXXON was the largest company in the S&P 500 by market value. In fact Exxon Mobil was a mainstay still through 2010, 2011, and even showed up in 2013-2014 as a top company. However, today Exxon Mobil is no longer even in the top 30 companies by market value. Again, the long-term trend of growth outperforming value continued last week as tech had a solid week. In the Russell 1000, growth outperformed value by nearly 4.4%, bringing the year to date differential in return of value to growth at 36 percent.Amazingly, there have been 75 daily market moves in the S&P 500 of 1% or more for the year. However we saw again, no 1% moves in the S&P 500 last week, indicating a recent few week trend of decreased volatility. There are a number of factors impacting the markets and this decreased volatility. One, to some degree people and larger companies have started to adapt to the new normal and either return to work and spending or adapt in new ways. Investors also appear to be better on the economy in the next 12-18 months. We have also seen bigger companies that have more technology beat private small companies so the overall stock market is performing better than the overall economy. DC continues to push out the stimulus to support the market and keep things afloat. Investors don’t appear to want cash or bonds which against inflation are still losing value. When it comes to some mixed news on the economy one need just look at unemployment, after last week’s drop of first time unemployment below 1 million new claims, this week we saw a small surge back up to 1.1 million first time claims. This brings the total number of people still collecting some type of unemployed at 28.5 million. The good news here is that trend line has continued to come down since the end of April, however, it has been declining slowly. A nice leading indicator that shows healthy economic growth is new housing starts. August and July are showing year over year growth in both new single family and multi-family housing starts, which is a great indicator for the next year. Interestingly foreclosures are at 0.7%, which is essentially an all-time low, where as 2011 that rate was around 4.5%. However, there are a number of delinquencies, which is close to 8.2%, highest since 2010/2011 – but these are not yet reported to credit reporting agencies as part of the Covid-19 relief. The new number of delinquencies, 30 days has been dropping, which looks to be a good sign we have seen the first wave come and go. However, it is important to monitor this as we go, but right now housing appears to be in a stronger place than many had expected. With so much going on in the world it is easy to get distracted, keep your clients looking at their long-term goals and help keep them in line with their plans. Remember you cannot control investment outcomes but you can help manage client expectations. Notes: ................
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