As the summer comes to a close, we begin the homestretch of 2020. Even though it spans one-third of the year, it seems like Labor Day to New Year’s Eve seems to go by in a blink for many of us. As each month comes to a close, we are beginning to regain a sense of normalcy and a better sense of composure as we continue to address the public health (and economic) crises we are continuing to work through.
August was another very strong month for the financial markets. With the S&P 500 and Nasdaq Composite notching new highs, the Dow Jones Industrial Average finished just shy of a new high-water mark. The story was much the same internationally as well. Each index notched higher-than-average gains in what is typically a relatively volatile month. The gains by index were…
• Nasdaq Composite 9.70%
• S&P 500 7.19%
• Dow Jones Industrial 7.92%
• MSCI EAFE (Int’l Dev) 5.14%
• MSCI Emerging Market 2.24%
We have written at length about how we have reached all-time highs with our economy in the midst of a historic recovery on our blog. You can read more here.
The fixed income markets fared worse than equity markets as long-term treasury yields continued to rise. As yields and bond returns observe an inverse relationship the rise in yields resulted in the Bloomberg Barclay Aggregate Bond index declining by 0.81%, though high yield bonds followed equities higher gaining 0.95% (as measured by the Bloomberg Barclay US Corp High Yield Index.)
While the economy is still staging a comeback, we have seen the pace of growth showing signs of moderating. Consumer spending has been the catalyst for growth both pre- and post- pandemic, retail sales and personal spending continued to grow, albeit at a slower pace than the beginning of the summer. Consumer sentiment started the month off a little rocky, signs of confidence began to improve by months-end. Though personal spending was stuck on simmer for most of the month, business spending continued to boil through the summer, with all major metrics blowing past expectations.
We continue to see considerable progress being made worldwide to combat the spread of the coronavirus. The daily-spread rate slowed to 0.7% by the end of August, after spiking as high as 2% in the month prior. Testing continues to disappoint though as new tests fell by over 9% from the last week of July to the last week of August. As the public has regained some composure, less “healthy” individuals are rushing out for testing like we saw as testing ramped up to start the summer. This is beginning to show in the increasing positivity rate nationwide. This pandemic has had several chapters with the newest chapter bringing about the re-opening of schools, with all eyes on how that will affect us moving forward.
Looking ahead, there do not appear to be significant bumps which would deter us from continued growth, though increasing consumer sentiment will continue to jolt the growth as we have seen in the past. We may see that come in the form of an additional stimulus package as Congress reconvenes early in the month. Other non-Covid risks remain as well, including geopolitical risks, continuation of social unrest and the upcoming election. As usual, a well-diversified portfolio, like we have constructed with you, that matches your timeline with your goals is designed to provide you with the most efficient path forward. As concerns arise, please continue to reach out to us so we can continue this conversation in a more tailored way for you and your family.
Ryan Flanders, CFA