AUGUST 2020 ECONOMIC UPDATE
Stocks rose in July as better-than-expected corporate earnings and progress on a COVID-19 vaccine encouraged investors.
The S&P 500 gained 5.5 percent, while the Nasdaq composite picked up 6.8 percent. The Dow Industrials, which have lagged much of the year, rose 2.4%.[i]
Stocks raced higher at the start of the month, as the Nasdaq Composite set multiple fresh record highs.
Overall, economic reports were upbeat, and investors focused on the positive trial results from a COVID-19 treatment.
Stock prices slipped after an uptick in jobless claims and increasing tensions in the U.S.-China relationship. But the markets closed the month strong after mega-cap technology names checked in with solid numbers in the second quarter.[ii]
The month of August has gained a reputation for being one of the more volatile months of the year.
Last August, for instance, the S&P 500 Index posted 11 moves of more than one percent in 22 trading days.
One of the reasons for the volatility is that many traders are away on vacation, resulting in light volume, which may have the effect of amplifying market volatility.[iii]
This August will stand on its own merits. But investors should be prepared for headlines that could result in outsized moves.
Please remember that nothing we talk about here is a recommendation.
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[i] The Wall Street Journal, July 31, 2020. The Dow Jones Industrial Average is an unmanaged index generally considered representative of large-capitalization companies on the U.S. stock market. The S&P 500 Composite Index is an unmanaged index that is considered representative of the overall U.S. stock market. The Nasdaq Composite Index is an unmanaged index that is considered representative of small-capitalization companies. Index performance is not indicative of the past performance of a particular investment. Past performance does not guarantee future results. Individuals cannot invest directly in an index. The return and principal value of stock prices will fluctuate as market conditions change. And shares, when sold, may be worth more or less than their original cost.
[ii] CNBC.com, July 30, 2020
[iii] CNBC.com, August 31, 2019
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