It's hard to believe that the summer is almost over and we are heading into the fall. I for one am looking forward to the beautiful autumn foliage taking the place of this blistering summer heat.
Last week the markets continued to climb, with good news regarding the coronavirus fight combining with solid economic data to encourage investors to stay in “buy” mode when it comes to equities. For the week, the S&P 500 climbed 3.3% and the Dow increased by 2.6%. Unless today (August 31st) is a particularly rough one, the markets are poised to have their best month of August in 34 years.
On the economic front, there are several items of note:
- With almost all of the S&P 500 companies having now reported 2nd quarter earnings, there was a surprise to the upside as companies are enjoying improving (and in some cases strong) earnings. The bottom line is that profitable companies are smiled upon on Wall Street, and more and more companies are profitable again.
- Last week the Fed stated that they will let inflation run slightly higher than 2%, meaning interest rates will stay lower for longer, which is a big positive for equities as companies will have more incentive to borrow and expand.
- Investors continue to be forward-thinking, focusing more on long-term trends than the short-term headlines. For our part, we will seek to continue to stay in their patient ranks.
On the Covid-19 front, last week the U.S. gave emergency use authorization for a new coronavirus test that delivers results in minutes and could play an important step in detecting the virus early. At the same time, several biotechnology companies have reported progress in clinical trials of their vaccine candidates. After peaking at around 70,000 in July, the number of new daily coronavirus cases has started trending lower to about 43,000 per day. While every new case is obviously of concern, it is encouraging that the trend line for the virus’s spread is going down.
As always, thank you for the opportunity you have given me to serve you.