Market Update - August 2020

The battle versus COVID-19 continues. The spread in some of the recent hotspots like California and Florida is slowing, while states in the Northeast and Midwest are now experiencing increases in cases. According to the World Health Organization, 27 vaccines are in human trials and the chances of an approved vaccine by late this year or early next year are quite high.

As of August 5th, the S&P 500 Index has moved into positive territory for the year after being down more than 30% in March, making 2020 one of the largest reversal years ever. Going back to 1950, August and September have historically been the two worst months of the year for stocks. On-going high jobless claims, combined with evidence of reduced consumer mobility from several high-frequency data points suggest the stage could be set for stocks to take a well-deserved break.

At the July 29 Federal Open Market Committee meeting, Federal Reserve (Fed) Chair Jerome Powell made it very clear that the Fed has additional tools to support the recovery and that low interest rates may be here to stay well beyond this year and next. The economy has improved off the March lows, but it isn’t near the record-breaking levels we saw earlier this year. Powell also noted that further relief from Congress was “essential” to help support the economy.  

Signs that the economic recovery may be leveling off have not prevented corporate America from delivering earnings well above expectations. Leaders like Apple, Amazon, and Facebook reported extremely strong results in the second quarter, helping these influential stocks move significantly higher. FactSet consensus estimates of future earnings have ticked higher as well, suggesting corporate America may be confident in the eventual economic rebound. 

Baseball Hall of Fame catcher Yogi Berra said, “If you torture numbers enough, they will tell you anything,” which fits well with what we’re seeing right now in 2020. Some data appears good, while some data appears troubling. This journey is not over yet and there may be more twists and turns before society and the economy can fully recover from COVID-19. Much like all journeys, this one has an end date and we will get there.  

Until then, please remain diligent, safe and strong. We encourage you to contact our office at 302.234.5655 or if you have any questions about your investment strategies or financial goals.