The stock market marches to its own drummer, and what it thinks the economy will be “playing” months down the road. Last week, the S&P 500 index, representing 82% of the entire U.S. stock market capitalization, set five record closings in a single trading week. That last happened during the week of October 16-20, 2017. Since hitting a bear market low on 3/23/20, the stock index has gained +58.1 % (total return) in 111 trading days through last Friday 8/28/20. By comparison, the recently ended 11-year bull market (from 3/09 /09 to 2/19 /20) gained +49.9% (total return) during its first 111 trading days on its way to a +529% (total return) overall bull market gain (source: BTN Research).
In a virtual address last week to the annual Jackson Hole (WY) monetary policy symposium, Fed Chair Jerome Powell said that the U.S. central bank will tolerate annual inflation “moderately above” 2% going forward (2% has been the Fed’s target inflation rate for the last 8 ½ years). What Powell may have been really telling the market is that it will take significant domestic inflation to cause the Fed to raise interest rates anytime soon, possibly for years to come. That’s likely good news for home buyers (low mortgage rates) but bad news for conservative retirees (low CD rates) (source: Federal Reserve).
It was 15 years ago (8/29/05) when the deadliest hurricane in U.S. history made landfall in Louisiana. Hurricane Katrina caused $75 billion of damages and killed more than 1,300 people. Last week’s Hurricane Laura hit landfall near Cameron, LA on Thursday morning (8/27 /20) as a Category 4 storm. As of the weekend, Laura had caused an estimated $12 billion in damages while killing 14 people (source: Moody’s Analytics).
Notable Numbers for the Week:
- SHIFT THE RISK – If a bank loans out money to a business through the “Main Street Lending Program,” the Fed will purchase from the bank 95% of the loan amount in order to reduce the lender’s risk (source: Federal Reserve).
- RECORD SPENDING – The four months that have produced the greatest government “outlays” in U.S. history have been the last four months – April 2020 through July 2020. “Outlays” in June 2020 were $1.1 trillion, more than double the pre-pandemic record of $440 billion set in May 2019 (source: Treasury Department).
- TWO STATES. VERY DIFFERENT IMPACT – The jobless rate in California in February 2020 (pre-pandemic) was 3.9%, before soaring to 13.3% by July 2020. The jobless rate in Wyoming in February 2020 (pre-pandemic) was 3.7%, before rising to 7.1 % by July 2020 (source: Bureau of Labor Statistics).
- WHAT A MESS – American consumers’ demand for paper towels is +25% higher today than it was before the COVID-19 pandemic hit the United States in February 2020 or six months ago (source: Procter & Gamble).
Mark R. Reimet, CFP®
CERTIFIED FINANCIAL PLANNER™