Insights

Top News:

8/31: Despite a dearth of U.S. macroeconomic news, mega cap tech firms led the NASDAQ to new record highs.  A leading indicator in China showed that business sentiment continued to improve in August. 

 

9/01: A U.S. manufacturing index showed recovery for a third straight month in July, even as industry executives are “holding off on capital investments for the rest of 2020.” Home prices in the U.S. saw an annual increase of 5.5% in July, due to “strong” demand and tight inventory.  Elsewhere, a similar uptick in manufacturing activity was reported in China in August. Finally, August’s projected negative inflation in the Eurozone area prompted speculation of additional monetary support from the ECB.

 

9/02: U.S. stock indices hit another all-time highs, despite the Fed’s Beige Book showing “modest” economic gains, not to mention news of fewer job gains than expected in the private sector in August.  Meanwhile, Australia became the latest country to fall into recession as of 2Q, although it is seen as better positioned for recovery. 

 

9/03: A gauge of business activity in the U.S. services sector declined sequentially in August, as the boost from the reopening of businesses and fiscal stimulus faded.  After days of record highs, profit-taking in an overextended market prompted NASDAQ to lead other indices lower by 5%.

 

9/04: A broader measure of U.S. unemployment, which includes discouraged workers and those holding part-time jobs, fell to 14.2% from 22.8% at the peak in April.  Nonetheless, observers remain cautious on the sustainability of further job growth.

 

Heard on the Street:

“The S&P 500 is in a long-term secular bull market. I just think we’re overdue for a bit of consolidation… If you’re long the S&P 500 right now, I would hold on. If you’re looking to put new money to work, I would wait for a bit of a pullback.  There’s going to be a massive amount of economic activity that happens in 2021.”

— Art Hogan, chief market strategist of National Securities as quoted by CNBC on 8/30/2020

 

“How much inflation is the Fed comfortable with?  The FOMC was surprisingly vague with respect to its inflation averaging framework, saying merely that it will aim to achieve inflation ‘moderately above 2 percent for some time’ following periods of undershoots. What does that mean in practical terms? We simply don’t know.”

— Aneta Markowska, chief economist at Jefferies, as quoted by MarketWatch on 8/29/2020

 

Longer Game:

Unprecedented monetary stimuli injected by the Fed, not to mention its recently announced policy revisions on inflation and unemployment, have distorted market valuations.  So much so that even pros on the Street are left bewildered by the full implications.

 

A shrinking middle class in the U.S., precipitated by well-documented income/wealth gap, has deservedly garnered much attention.  Bill Ackman, the outspoken founder of Pershing Capital Management, argued (pg. 11-13) that steps need to be taken to close the increasing inequality if capitalism is to be preserved as a system.

 

Bonus:

One can’t be blamed for feeling whipsawed by the daily market swings.  Here’s a list of 20 “must know” stats to help understand the broader picture of how we arrived and where we stand.