Welcome to the last week of July (already!). Mother Nature certainly doesn’t want us to forget the hottest month of the year, either, so She is greeting us with another scorcher week in the Northeast.
Conversely, the markets cooled down last week, as they slipped and ended a 3-week winning streak. The Dow (-0.7%), NASDAQ (-1.3%), and S&P (-0.3%) all ended the week down, thanks to the last two trading days of the week, as the indices were up through Wednesday. Unless you missed all of the news last week, the number of cases of the Coronavirus has risen across nearly all of the US, with some of the more populated states (Taxes, Florida, and California) hitting new records. This is causing concern as to whether or not there may be a second wave of shutdowns and putting more restrictions on the economy. This has impacted most of the tech giants represented by the acronym FAANGM (Facebook, Amazon, Apple, Netflix, Google, and Microsoft), as all but Amazon were more deeply in the red last week. Those six stock represent nearly half of the NASDAQ, and Apple (-3.8% for the week) is found in all three indices.
Conversely, diversified bonds funds performed nicely last week, gaining about 0.5%. This extended their rally from the COVID abyss, as they are now up about 3% from the pre-COVID days, and up about 5% YTD. I am also pleased to announce that despite the markets being down last week, all of our actively managed portfolio models were up last week, thanks in great part to their bond holdings and not being too heavily weighted in the tech giants.
As noted in the past couple weeks’ reports, we are in the midst of corporate earnings reporting season. Despite an expected drop of 44% from last year, FactNet reports that corporate earnings projections have been raised to a drop of “only” 42%. And that’s supposed to be good news? Nothing like clinging to the silver lining, eh? It’s like my house got ransacked and robbed, but at least they left my one TV! Well, we still have about ¾ of earnings season remaining. We already expect it to be lousy, but the question is what the companies are expected to earn in coming quarters and in 2021. The jury is still out on that, so that will be important data to learn and digest, and will likely have an impact on the stock markets.