Economic Update 8-24-202

• Economic data for the week included strength in a variety of housing metrics, continued improvement in a broad index of leading economic indicators, but a pullback in several regional manufacturing indexes.
• U.S. equity markets gained upon continued stronger economic data and hopes for a near-term vaccine, while foreign stocks lost ground due to continued uncertainty over global trade relations and a virus uptick. Bonds fared well as interest rates ticked downward again. Commodities were mixed, with little change in oil prices, while natural gas prices again spiked.

U.S. stocks gained last week, with continued strength in economic results—notably housing. By sector, technology, consumer discretionary, and communications led the way, in order, while cyclical energy and financials lost the most ground. Apple became the first $2 tril. market cap firm in history, when $1 tril. not that long ago was also record-breaking.

Foreign stocks in developed markets decoupled from domestic stocks last week by declining, while emerging markets eked out a flattish result. An uptick in Covid infections again in Europe held back sentiment, while tensions in U.S.-China trade appeared to hold back optimism more outside the U.S. than within. Tighter restrictions in areas such as Spain and Italy exacerbated this soured mood. Japanese GDP for Q2 was reported at an annualized -27.8%, which was largely in line or a bit better than other developed nations, yet still a record drop. Equities in Brazil declined as the government appears to be publicly wrestling with the need for additional financial stimulus, while also trying to hold the line on fiscal discipline to maintain credit and currency stability—a unique wrinkle that Covid woes have brought upon emerging market nations.

U.S. bonds gained across the board as interest rates ticked downward, with investment-grade and high yield corporates leading with the strongest results, with credit spreads tightening. Foreign bonds also inched upward, with the exception of emerging market local bonds, which lost significant ground.

Commodities were mixed to higher, as agriculture and industrial metals gains outshined flatter results for energy and precious metals. The price of crude oil rose by a dollar or so during the week, but ended at just over $42/barrel. Reports of slower oil demand weighed on general sentiment, despite the net increase. Natural gas prices spiked at one point due to reports of slower production—which raises fears of a winter warming shortage.

Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. 

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