Monthly Market Insights | July 2020
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U.S. Markets |
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Stock prices climbed higher in June, as investors looked beyond an increase in COVID-19 cases as well as reports that several states planned to slow the pace of their economic re-opening. The Dow Jones Industrial Average gained 1.69 percent, while the Standard & Poor’s 500 Index tacked on 1.84 percent. The Nasdaq Composite, already up 6.75 percent in May, rose another 5.99 percent.1
Momentum LostStocks opened the month higher, but the momentum quickly stalled, as states struggled to re-open their economies while facing an increase in COVID-19 cases. Investor sentiment was further dampened by a subdued forecast of economic recovery issued by the Federal Reserve. Focus ShiftedBut the market turned and rallied on a series of upbeat news announcements. First, by the Fed, which said that it would extend its bond-buying program to include the debt of individual companies. Second, a strong retail sales report buoyed spirits. And finally, the news of an effective COVID-19 treatment for critically ill patients strengthened investor sentiment. Bump Up in COVID-19Market direction reversed late in the month, due to an increase in COVID-19 cases in Florida, Texas, and California, which prompted some states to roll back their re-opening plans. However, stocks still closed out the month strong, posting back-to-back gains to cement a solid showing. Sector ScorecardIndustry sectors were mixed in June, with gains in Consumer Discretionary (+1.54 percent), Industrials (+0.95 percent), Materials (+0.18 percent), and Technology (+4.78 percent), while losses were posted by Communication Services (-1.07 percent), Consumer Staples (-1.72 percent), Energy (-4.54 percent), Financials (-2.48 percent), Health Care (-4.49 percent), Real Estate (-0.98 percent), and Utilities (-5.81 percent).2
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What Investors May Be Talking About in July |
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Assessing the economy has become increasingly difficult due to the uncertainties caused by the pandemic. For example, May’s employment report from the Bureau of Labor Statistics showed that the economy added 2.5 million new jobs. Wall Street economists were stunned by the news, having forecast a drop of 8.3 million.3 Rise in Real-Time DataThis has left many economists and analysts to look for more creative ways to gauge “real-time” economic activity. In an effort to expand their toolset beyond traditional government reporting, forecasters are now mining a robust vein of real-time data, such as satellite imaging, to count cars parked at retail locations. They also are looking at data, generated by Google and Apple, to determine traffic, pedestrian volumes, and the number of people taking public transportation. Restaurant apps are getting used too. They can help show whether people are returning to social settings. Traditional economic indicators remain vital, but expect a growing focus on newer, “big data” tools that give critical real-time snapshots. |
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World Markets |
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Economic re-opening and supportive central bank policies propelled markets overseas, as the MSCI-EAFE Index gained 2.92 percent.4 European markets responded to a general easing of economic lockdown and fresh central bank support. Germany rose 6.25 percent, while France picked up 5.12 percent. The U.K. lagged, gaining only 2.16 percent.5 Pacific Rim stocks were mostly higher. Japan tacked on 1.88 percent, while Australia climbed 1.35 percent.6
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Indicators |
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Gross Domestic ProductThe final reading of GDP growth for the first quarter was unchanged, at -5.0 percent.7 EmploymentThe unemployment rate dropped to 13.3 percent, as employers added 2.5 million new jobs in May. Many of the sectors hit hardest by employment cuts, such as the travel, hospitality, and retail industries, led the rebound in hiring.8 Retail SalesRetail sales leaped 17.7 percent in May. Clothing and furniture stores led the group.9 Industrial ProductionIndustrial production climbed 1.4 percent; though, manufacturing output managed a stronger increase of 3.8 percent.10 HousingHousing starts increased 4.3 percent in May; though, permits for future home construction rose 14.4 percent. The increase in permits indicates that home building may be emerging from its COVID-19-related contraction.11 Existing home sales dropped 9.7 percent in May.12 Sales of new homes rose 16.6 percent, which was above consensus estimates.13 Consumer Price IndexFor the second straight month, consumer prices fell, dipping 0.1 percent in May. Core inflation, which excludes the more volatile food and energy components, also retreated by 0.1 percent.14 Durable Goods OrdersOrders for long-lasting goods jumped 15.8 percent, well above the consensus estimate of 10.3 percent.15 |
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The Fed |
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Following its Federal Open Market Committee two-day meeting in June, the Federal Reserve said that it planned to keep its federal funds rate near zero. Fed Chair Jerome Powell confirmed that the Fed would maintain its monthly purchases of Treasury bonds and mortgage-backed securities. The Fed also issued its forecasts for 2020 to 2022. It anticipates the federal funds rate remaining at zero, with inflation of 0.8 percent for 2020, 1.6 percent in 2021, and 1.7 percent in 2022. Fed officials said that they expect the GDP to fall by 6.5 percent this year, but increase 5 percent in 2021 and 3.5 percent in 2022. Officials also expect unemployment to steadily decline over the next 2½ to 5½ years.16 By the Numbers: National Pickle Month |
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Investing involves risks, and investment decisions should be based on your own goals, time horizon and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Any companies mentioned are for illustrative purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The forecasts or forward-looking statements are based on assumptions, may not materialize and are subject to revision without notice. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. The Dow Jones Industrial Average is an unmanaged index that is generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite index is an unmanaged group of securities considered to be representative of the stock market in general. The Nasdaq Composite is an index of the common stocks and similar securities listed on the Nasdaq stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies. The Russell 1000 Index is an index that measures the performance of the highest-ranking 1,000 stocks in the Russell 3000 Index, which is comprised of 3,000 of the largest U.S. stocks. The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indexes from Europe, Australia and Southeast Asia. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility. The Hang Seng Index is a benchmark index for the blue-chip stocks traded on the Hong Kong stock exchange. The KOSPI is an index of all stocks traded on the Korean Stock Exchange. The Nikkei 225 is a stock market index for the Tokyo Stock Exchange. The SENSEX is a stock market index of 30 companies listed on Bombay Stock Exchange. The Jakarta Composite Index is an index of all stocks that are traded on the Indonesia Stock Exchange. The Bovespa Index tracks 50 stocks traded on the Sao Paulo Stock, Mercantile & Futures Exchange. The IPC index measure of companies listed on the Mexican Stock Exchange. The MERVAL tracks the performance of large companies based in Argentina. The ASX 200 index is an index of stocks listed on the Australian Securities Exchange The DAX is a market index consisting of the 30 German companies trading on the Frankfurt Stock Exchange. The CAC 40 is a benchmark for the 40 most significant companies on the French stock market index. The Dow Jones Russia Index measures the performance of leading Russian Global Depositary Receipts (GDRs) that trade on the London Stock Exchange. The FTSE 100 Index is an index of the 100 companies with the highest market capitalization listed on the London Stock Exchange. Please consult your financial professional for additional information. Copyright 2020 FMG Suite. |
1. The Wall Street Journal, June 30, 2020
2. FactSet Research, June 30, 2020
3. The Washington Post, June 5, 2020
4. MSCI.com, June 30, 2020
5. MSCI.com, June 30, 2020
6. MSCI.com, June 30, 2020
7. CNBC.com, June 25, 2020
8. The Wall Street Journal, June 6, 2020
9. The Wall Street Journal, June 16, 2020
10. MarketWatch.com, June 16, 2020
11. CNBC.com, June 17, 2020
12. CNBC.com, June 22, 2020
13. Reuters.com, June 23, 2020
14. The Wall Street Journal, June 6, 2020
15. MarketWatch.com, June 25, 2020
16. CNBC.com, June 10, 2020
17. History.com, May 21, 2015
18. TasteAtlas.com, July 1, 2020
19. GrandViewResearch.com, 2020
20. GrandViewResearch.com, 2020. For 2018, the most recent data available.
21. GrandViewResearch.com, 2020. For 2018, the most recent data available.
22. GrandViewResearch.com, 2020
23. Mobile-Cuisine.com, 2020
24. Mobile-Cuisine.com, 2020
25. Mobile-Cuisine.com, 2020
26. KOLD.com, November 29, 2019
27. KOLD.com, November 29, 2019
28. ILovePickles.org, 2020