ND&S Weekly Commentary 8.24.20 – Markets Mostly Higher, again

August 24, 2020

Markets were mixed last week with most U.S. indices moving higher while international indices gave back a bit of ground. Technology led the way, once again, last week as investors questioned the value/cyclical trade given a lack of progress on fiscal stimulus (it must be an election year …) and disappointing jobless claims. The Fed added a dose of realism as they released minutes from their July meeting – the minutes highlighted the Fed’s concerns for the lack of strength in the broader economy.

For the week, the DJIA eked out a 0.09% gain while the S&P 500 advanced 0.77%. Noteworthy is the fact that the S&P 500 climbed to a record high thanks to its top-heavy weighting in technology stocks. The Nasdaq jumped 2.69%. Developed international markets lost a bit of ground. For the week, the MSCI EAFE index lost 0.99% while emerging market equities (MSCI EM) were lower by 0.10%. Small company stocks, represented by the Russell 2000, finished in the red by 1.59% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week higher by 0.27%. As a result, the 10 YR US Treasury closed at a yield of 0.64% (down ~7 bps from the previous week’s closing yield of ~0.71%). Gold prices closed at $1,934.60/oz – down 0.12% on the week. Oil prices were relatively flat last week as oil closed at $42.34.

Economic news released last week was mixed. On Tuesday, the U.S. Census Bureau reported that housing starts jumped 22.6% month-over-month to a seasonally adjusted annual rate of 1.496 million, exceeding expectations for a rate of 1.25 million. Housing continues to be a bright spot for the U.S. economy. On Thursday, the Department of Labor reported that initial jobless claims for the week ending August 15th were 1,106,000, missing expectations for 923,000 claims. On Friday, the HIS Markit Group reported that the Composite PMI Output Index for August hit an 18-month high at 54.7, up from 50.3 in July. Also on Friday, the National Association of Realtors reported that existing homes sales rose 24.7% in July, exceeding expectations.

The markets seem to be at a crossroad … with some markets hitting an all-time high, investors are rightly concerned about extended valuations and the upcoming election. Of course, any encouraging news on the vaccine front will likely push markets higher. We urge investors not to overthink the current wall of worry and to stick close to long-term target asset allocations.

Enjoy the last week of August!

“Success is how high you bounce when you hit bottom.” – George S. Patton