Positive Move | August 14, 2020

AUTHOR: Jason J. Roque, CFP®, APMA®, AWMA®
TITLE:    Investment Adviser Rep – CCO
TAGS:   Nasdaq, Jobs, Mortgage, Correction

Markets moved into positive territory last week. Are the valuations founded?


Markets ended mixed on Monday. Leadership shifted to cyclical asset classes such as consumer discretionary and energy. President Trump’s moves over the weekend to extend unemployment benefits were met by investors well. These moves induced investors to purchase stocks that would imply a recovery sooner rather than later. The Nasdaq actually slipped on Monday and this was indicative of escalations between the US and China. Technology shares would stand quite a bit to lose on a harsh US/China relationship.


Most of the day was spent in the green for Markets; flirting with the 8th straight day of gains for the S&P 500. Additionally, it was inching closer to its record high set on February 19th. All that evaporated in the final hour of trade as markets ended up being down nearly 1%. Even with the sell off, cyclical holdings like energy and financials outperformed technology stocks.


Markets soared on Wednesday as the S&P 500 briefly broke through it’s all time high. The NASDAQ led the gains, recapturing its losses from the prior day. As if to say, what concerns over US/China tensions?


The opening bell was accompanied by mixed Markets, but the less than expected initial jobless claims buoyed spirits on the market. Confidence wavered as the day wore on and markets ended in the red.


Markets closed Friday and the week in a mixed tone. This came under typically light summer volumes. Consumer sentiment was better than expected and while retail sales grew, they were less than anticipated. Capacity utilization improved, coming in at 70.6%. This was a move that received less fanfare but it is a good sign for the overall direction of the economy. Under full economic activity, it will generally be between 76% and 84%.


After reaching all time highs, the S&P 500 found it difficult to accelerate past those highs and actually regressed. The move came only 5 months after markets bottomed out. While an exciting return of valuations, earnings have not returned as robustly. This means values are stretched further than they were pre-pandemic. Cautiously move forward as earnings will need to ramp up to justify these current values.

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