LAST WEEK AND THE ECONOMY
Equity markets followed a rather turbulent week with tempered moves. A lack of progress towards the next coronavirus relief package kept investors guessing which way markets were going. Major indices showed mixed results, and economic numbers continued to disappoint.
The S&P 500 advanced 1.73%, and the Nasdaq Composite index climbed 3.69% for the week. However, The Dow Jones Industrial Average sank 0.16% and the MSCI EAFE index, which tracks developed overseas stock markets, sank 2.13%.
Microsoft Working on Purchasing TikTok in the U.S.
Popular social media giant, TikTok, has come under fire recently from the Trump administration because of its ties to China. This reportedly poses a national security threat as the app, like most social media apps, has access to a trove of user data.
Following the announcement, Microsoft reported it was working with the White House on a purchase TikTok from its parent company ByteDance. This deal would put user’s info into the hands of a U.S. company and likely prevent a ban of the platform. TikTok has soared in popularity over the past year, partly due to coronavirus lockdowns.
GDP Release Sets Record
GDP in the second quarter sank at an annualized rate of 32.9%, the largest drop in the more than the 70 years that the statistic has been calculated. The second quarter suffered from some of the strictest lockdowns related to the Coronavirus pandemic, so these results were expected. However, a number this large can be shocking under any circumstance.
While the labor market has begun to recover some of the jobs that were lost due to the pandemic, recent surges in coronavirus cases are forcing state and local governments to rethink or reverse their reopening procedures. This could prolong the length of the recovery, and some evidence of this can be seen in the recent uptick in unemployment claims after months of decline.
Fed keeps rates steady but could alter its inflation strategy.
The Federal Reserve, as expected, kept rates steady at near zero at the latest FOMC meeting. Fed officials reiterated that they are committed to doing whatever they can do to keep the economy afloat. While no rates were changed, the Fed has committed to increasing its holdings in several areas including Treasuries and agency debt.
In addition, central bankers are deliberating another issue, inflation. Prior to the pandemic, inflation was struggling to pick up, despite some of the lowest unemployment numbers in history. To combat this, the Fed may start to allow inflation to run past the 2% target before acting to tame it. The Fed hopes that this along with tying future interest rate moves to inflation goals may help solve their inflationary problems.
Last Week’s Close
S&P 500 3,271.12 (+55.49 / +1.73%)
DOW 26,428.32 (-41.57 / -0.16%)
NASDAQ 10,745.27 (+382.09 / +3.69%)
Russell 2k 1,480.43 (+12.87 / +0.88%)
VIX 24.46 (-1.38 / -5.34%)
Key Economic Data
Unemployment Rate: 11.1% (As of June 2020 – Next Report: 8/7/20)
FOMC Target Rate: 0 – 0.25% (As of July 29, 2020 – Next Report: 9/16/20)
During times of great change or uncertainty, it is important to revisit your budget. COVID-19 has impacted our lifestyles by limiting dining out, entertainment and social gatherings. Make sure your budget reflects your new lifestyle.
The Week Ahead – Key Economic Data
Monday: ISM Manufacturing Index.
Wednesday: International Trade, EIA Petroleum Status Report.
Thursday: Jobless Claims.
Friday: Employment Situation.
The Week Ahead – Companies Reporting Earnings
Monday: The Clorox Company (CLX), HSBC Holdings plc (HSBS)
Tuesday: The Walt Disney Company (DIS), Sony Corporation (SNE)
Thursday: T-Mobile US, Inc. (TMUS), Uber Technologies, Inc. (UBER)
Friday: Berkshire Hathaway Inc. (BRK.A / BRK.B), Toyota Motor Corporation (TM)
“An investment in knowledge pays the best interest”
Last Week's Riddle and Answer
Last Week's Riddle:
How many 9s are in the range of numbers from 1 to 100? (Remember, the number 99 has two 9s in it.)
Last Week's Answer:
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