This week the stock market adjusted lower on fears of a fading economic recovery and the need for further massive stimulus springing from the growing spread of COVID-19. The S&P 500 and the Dow slipped, breaking a string of three weekly gains in a row, while the NASDAQ underperformed its peers, recording its second consecutive weekly decline. Momentum shifted, as the market’s gains early in the week were offset by declines on Thursday and Friday. We could see a move back into the high flying stocks as Apple, Google, Amazon and Facebook all report earnings this coming week.
Covid On the Rise
Since mid June, the five-day moving average of new confirmed cases has jumped from just over 20,000 to just over 73,000. Markets are not reacting the way they did in March to the spike in cases because of the positive developments on the vaccine front. The resurgence of the disease is slowing, stalling and, in some cases, reversing, the staged reopening of the economy and will likely continue to hobble the restaurant, hotel, travel, entertainment and retail industries. The pandemic slows business investment, hiring and lending decisions across the economy, which is why we will get another stimulus package from the government. Money being spent to pump stimulus into the economy today could eventually lead to higher taxes and inflation in the future which could potentially reduce your purchasing power in retirement.
Results Aren't as Bad as Feared
The S&P 500 nearly unchanged for the year which suggest a risk of a correction. There are however still opportunities over the longer term, maintaining equity exposure allows you take advantage of an economic surge once COVID-19 has been tamed. Although corporate earnings are in sharp decline, second-quarter earnings are coming in a bit better than expected, based on results from the roughly one-quarter of S&P 500 companies that had released numbers as of Friday. Quarterly earnings are now projected to decline of about 42%, compared with the 44% drop that had projected a week earlier.
Is it Time to Sell Your Home or Refinance?
The U.S. housing market is posting record month-to-month growth after falling sharply in the spring as a result of the pandemic. Sales of existing homes jumped 21% in June, compared with the previous month, according to the National Association of Realtors. That’s the largest monthly increase since tracking of the data began in 1968. That coincides with the yield of the 10-year U.S. Treasury bond falling on Thursday to its lowest level in three months, dropping to 0.58%. The recent decline in yields is a key reason why mortgage rates have been setting record lows.
I am Stephen Caruso, Financial Advisor and I am here to help at any time. If you would like to schedule a phone appointment. I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment.
The S&P 500 continued higher marking its third consecutive week of gains and reached intraday levels not seen since the market sell-off began in late February; at its Wednesday peak, the index was also briefly in positive territory for the year. Outperformance of smaller-cap stocks, which have considerably lagged in recent months is also an encouraging sign.
Earnings season starts. The week marked the unofficial start of what is likely to be the ugliest earnings season in recent memory. Several major banks reported steep drops in profits as they set aside billions of dollars in anticipation of writing down bad loans. Analysts expect overall profits for the S&P 500 to contract 44% in the quarter relative to a year before—if confirmed, it would be the worst performance since the 69% earnings drop amid the financial crisis in the final quarter of 2008.
Early vaccine trials are fueling hope. Wall Street opened the week with worries about the resurgence of the coronavirus across much of the U.S.. Midweek positive vaccine data sparked optimism. Tuesday, Moderna Therapeutics announced that its vaccine had produced high levels of antibodies in all test participants in an initial safety trial. On Wednesday, Oxford University researchers announced that their vaccine candidate through AstraZeneca, had produced not only antibodies in participants, but also “killer” T-cells that may offer prolonged immunity. Both vaccine candidates are receiving support from the U.S. government’s “Operation Warp Speed” program, which means the vaccines may be available in limited quantities as early as the fall if further test results are positive. The positive news prompted Dr. Fauci, to say he believes the U.S. will meet its goal of having a coronavirus vaccine by year-end.
Finally, the term resilient is often used to describe the comeback we are experiencing in the market. Resilience is a universally admired trait. We use catchphrases like "New York Tough" as a rallying cry to get through tough times like the ones we are experiencing today. Yesterday, the world lost two of its best examples of real life resilience with the passing of C.T. Vivian and John Lewis. I will close with a quote from C.T. Vivian:
"Leadership is found in the action to defeat that which would defeat you."
I am here to help at any time. If you would like to schedule a phone appointment. I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email Stephen Caruso, Financial Advisor if you would prefer an in person appointment.
Happy Independence Day.
In the holiday-shortened week, the Dow Jones Industrial Average DJIA, +0.35% added about 3.3%, bringing its year-to-date decline to 9.5%, while the S&P 500 SPX, +0.45% gained about 4%, and is now down 3.1% for the year. The Nasdaq Composite COMP, +0.52% is nearly 14% higher in the year to date, after taking another 4.6% leg up. What happens next with the market will largely depend on the direction of the virus. If we get the spread back under control or we get a vaccine then likely the markets will continue higher.
The other wild card for the markets is the current unrest. This 4th of July let's hope our nation can heal its divisions. Perhaps that starts, with remembering the important contributions of all those who made our nation possible. If you have been Prospect Park perhaps you have seen this monument of Marquis de Lafayette (below) at the 9th Street entrance. Perhaps, you have never heard of the man on the left, James Armistead, without whom our victory of Yorktown may not have been possible. Armistead, a slave, who volunteered for service with Lafayette during the siege of Richmond in 1781. Before long, he was performing important espionage service behind enemy lines, masquerading as an escaped slave while he obtained information about the plans and movements of the British. He continued his spying as a servant in Cornwallis’s camp during the Yorktown Campaign and relayed intelligence to Lafayette that helped bring about the American victory at Yorktown. When Lafayette returned to America in 1784, he wrote a special testimonial about Armistead’s service and was instrumental in helping win his win his freedom from slavery from the Virginia assembly in 1787. In tribute to Lafayette, James Armistead adopted the surname Lafayette, which he used for the rest of his life.
I am Stephen Caruso, Best Selling Author and Financial Advisor, here to help at any time. If you would like to schedule a phone appointment. I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment.