Todd’s Take on the Market
Stocks fell last week as investors took some money off the table after a record run over the last 2 months.
The Dow fell 5.51%, the S&P 500 fell 4.73% the Russell 2000 got hammered—down 7.89% but the tech-heavy NASDAQ only fell 2.27%.
Most of the gains recently have been centered around the re-opening trades, banks, retail, travel/leisure which have all been on a tear the last couple of weeks, but with new outbreaks occurring across the country and concerns about stock market valuations, something had to give and it was stock prices.
We heard from the Federal Reserve last week following their June meeting and they expressed serious concerns about the economy and the return to something that resembles a new normal. In fact, FED Chair Jerome Powell said they would not be raising interest rates for the next two years and went on to say they weren’t even “thinking about thinking about raising interest rates”. In other words, they aren’t going anywhere anytime soon and that had a big impact on banks specifically, which as you know make their money off of the interest rates they charge. As of Monday, June 16th, the FED went on to say they would now be buying corporate bonds in addition to the “junk bonds” they are already buying.
The Consumer Price Index (CPI) fell in the most recent reports, but don’t tell that to the millions of consumers who are seeing their grocery bills skyrocket. However, the Producer Price Index (PPI) showed a little rise thanks in part to the cost associate with doing business during this pandemic.
Jobless claims rose by over 1.5 million claims but that was better than expected, still, the number of continuing claims is hovering around 20.92 million continuing claims—this number is concerning.
Consumer sentiment, a measure of consumer feelings about the economy, actually rose. It’s probably because they are excited about not being confined to the house.
This week we will see activity on industrial production, retail sales and housing starts. Those retail sales figures will be the headline item of the week, but housing starts will also be closely watched. We remain cautious about any “recovery” due to the spike in new cases of COVID-19, which is cause for concern. Yet, shutting down the economy again—I think the government will be slow to do that—they are ready to get things rolling but at the expense of many lives? We’ll see. As always, stay tuned and we will keep you posted.
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
