The positive run for stocks continued in August as the major market indexes regularly reached all-time highs. While investors remained bullish toward equities, it wasn’t always clear why.
Although the economy is gradually picking up steam, it has a ways to go to reach its pre-pandemic level. Gross domestic product for the second quarter showed that the economy receded at an annual rate of 31.7%. Job growth is ongoing, yet more than 14 million people are receiving unemployment benefits.
Personal income inched ahead by 0.4%, but consumer spending rose by 1.9%. Inflation remained well below the Federal Reserve’s target of 2.0%, keeping prices for consumer goods and services down. Interest rates for loans and mortgages remain low helping the housing sector to surge.
The Federal Reserve has maintained accommodative measures to help spur the economy, yet additional stimulus relief from the federal government has reached a stalemate. Globally, tensions between the United States and China have risen, potentially putting the phase-one trade deal between the economic giants in jeopardy.
The COVID-19 pandemic continues to dominate nearly every aspect of life. States are struggling to settle on appropriate protocols for reopening schools. Testing for the virus has increased, and the numbers of COVID-related infections and deaths continue to mount. Throughout August, news of improved virus treatments and possible vaccines offered encouragement.
By the end of the month, each of the benchmark indexes listed here scored sizable gains, leading to the best August in decades. The technology sector continued to flourish last month, leading the Nasdaq to record highs. The Dow closed the month up 7.6%, followed by the S&P 500, the Global Dow, and the Russell 2000.
Year to date, the Nasdaq is 31.2% ahead of last year’s pace, followed by the S&P 500, which is up 8.3%. The Dow is nearly at its 2019 closing value, while the Global Dow and the Russell 2000 continued to gain ground.
By the close of trading on August 31, the price of crude oil (CL=F) was $42.81 per barrel, ahead of its July 31 price of $40.41 per barrel. The national average retail regular gasoline price was $2.182 per gallon on August 24, $0.007 higher than the July 27 selling price of $2.175, but $0.392 less than a year ago. The price of gold remained steady through August, closing at $1,974.90 on August 31, down slightly from its July 31 closing price of $1,989.90.
|Market/Index||2019 Close||Prior Month||As of August 31||Monthly Change||YTD Change|
|Fed. Funds||1.50%-1.75%||0.00%-0.25%||0.00%-0.25%||0 bps||-150 bps|
|10-year Treasuries||1.91%||0.53%||0.69%||16 bps||-122 bps|
Equities data reflect price changes, not total return.
Most economic indicators in July were positive as the economy continued to reopen. However, the pandemic still rages and new issues may develop as schools reopen. The trade dilemma with China will likely continue to impact the economies of both countries. New developments in the treatment of the pandemic should bring hope that the end is in sight and spur further economic growth.
Data sources: Economic: Based on data from U.S. Bureau of Labor Statistics (unemployment, inflation); U.S. Department of Commerce (GDP, corporate profits, retail sales, housing); S&P/Case-Shiller 20-City Composite Index (home prices); Institute for Supply Management (manufacturing/services). Performance: Based on data reported in WSJ Market Data Center (indexes); U.S. Treasury (Treasury yields); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI, Cushing, OK); http://www.goldprice.org (spot gold/silver); Oanda/FX Street (currency exchange rates). News items are based on reports from multiple commonly available international news sources (i.e., wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results. All investing involves risk, including the potential loss of principal, and there can be no guarantee that any investing strategy will be successful.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 largest, publicly traded companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2,000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. The U.S. Dollar Index is a geometrically weighted index of the value of the U.S. dollar relative to six foreign currencies. Market indexes listed are unmanaged and are not available for direct investment.
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