September Economic Update

Stock prices surged in August as investors cheered positive news on COVID-19 and welcomed a month-long series of upbeat economic reports. 

The Dow Industrials picked up 7.6 percent while the Standard & Poor’s 500 Index climbed 7 percent. The Nasdaq Composite, which has led much of the year, gained 9.6 percent.[i]

The S&P 500 index set a new high in late August, completing the fastest recovery from a bear market in history. The Nasdaq Composite also hit several new highs and closed above 11,000 for the first time.[ii],[iii]

Signs of a pick-up in manufacturing activity, better-than-anticipated factory orders, and falling new jobless claims showed an improving economy.[iv],[v],[vi]

In the final week of trading, news of a potential COVID-19 treatment and reports of a rapid test for detection helped keep the month-long rally rolling.

The election season is moving into a higher gear as November draws near. Will uncertainty about the election get reflected in the stock market?

Since 1992, the S&P 500 has lost an average of 2 percent in the three months leading up to the election. But it has been higher 43 percent of the time. Keep in mind that the 2 percent average includes the 20 percent drop prior to the 2008 election resulting from the ongoing credit crisis.[vii]

While past performance is no guarantee of future results, the lesson may be evident: Prepare for some short-term volatility while not losing sight of your overall investment strategy.

SOURCES

[i] The Wall Street Journal, August 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] MarketWatch, August 27, 2020 

[iii] The Wall Street Journal, August 18, 2020 

[iv] Barrons.com, August 6, 2020 

[v] MarketWatch, August 3, 2020 

[vi] MarketWatch, August 4, 2020 

[vii] CNBC.com, August 10, 2020 

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