Weekly Market Commentary

August 3, 2020

 

The Markets

Last week delivered a mixed bag of financial and economic news.

As many expected, the U.S. economy did not fare well during the second quarter. COVID-19 lockdowns and business closings caused productivity to fall by one-third. Real gross domestic product, which is the value of all goods and services produced by our country, dropped 32.9 percent during the second quarter of 2020. During the first quarter of the year, productivity fell by 5 percent.

The Federal Reserve held its Federal Open Market Committee meeting last week. Fed Chair Jerome Powell committed to “…using our tools to do what we can, and for as long as it takes, to provide some relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.”

Earnings offered a glimmer of positive news for investors. Al Root of Barron’s reported, “…companies are crushing overly bearish estimates…More than 300 [Standard & Poor’s 500 Index] companies have reported second-quarter numbers so far. About 85 percent are beating Wall Street earnings estimates by an average of 22 percent.”

Overall, blended earnings for the Standard & Poor’s 500 Index (S&P 500) has declined 35.7 percent. If that is the actual change in earnings for the second quarter, it would be the biggest year-over-year decline since the fourth quarter of 2008 when earnings dropped 69.1 percent.

Despite some of the negative news there is also the positive news and the S&P 500 and the Nasdaq Composites both gained last week. The Dow Jones Industrial Index finished the week lower.

Just as a point of reference we pulled the stock exposure back during the virus sell off and phased back in as the governments and states also opened. The stock allocations are now about where they were at the beginning of the year. If you desire to be more cautious or more growth oriented please contact my office and we’ll review how you are set up.

Focus On The Positive

“There are basically two types of people. People who accomplish things, and people who claim to have accomplished things. The first group is less crowded.”

–Mark Twain, Humorist

Stay healthy and careful.

 

Best regards,

Bill Spalding