A Month In Brief
The S&P 500 gained 5.5 percent, while the Nasdaq Composite picked up 6.8 percent. The Dow Industrial Average, which has lagged much of the year, rose 2.4 percent.1
Stock prices started the month elevated, thanks to early results from a COVID-19 vaccine trial, a better-than-expected jobs report, and a higher-than-anticipated reading on manufacturing activity.
Despite multiple states reporting increases in infections, stocks continued their climb, especially in the mega-cap technology companies. Meanwhile, investors remained confident, even as multiple regional Federal Reserve presidents warned of a bumpy economic recovery.
As of July 31, more than half of the companies comprising the S&P 500 Index reported their earnings. Of these companies, 84 percent reported earnings in excess of analysts’ estimates, with the Health Care and Technology sectors leading the way.2
In the final week of trading, investor sentiment alternated between worry and optimism. A disappointing jobless claims report and a stunning second-quarter GDP number caused some worry. But the mega-cap technology names reported exceptional earnings, capping off a strong month for the equity markets.
What Investors May Be Talking About in August
In the last ten years, August has gained a reputation for being one of the more volatile months of the year.
For instance, in August of 2019, the S&P 500 Index posted moves of more than one percent in 11 of the 22 trading days, with three daily drops of more than 2.6 percent. At the time, trade friction with China was escalating, and some market watchers suggested that the bond market was signaling a recession on the horizon.4,5
One of the reasons for the past volatility is that some traders are away on vacation, resulting in lighter volume, which may have the effect of amplifying market volatility. But this year may be different since many people are staying closer to home due to the pandemic.
This August will stand on its own merits. But investors should be prepared for headlines that could result in outsized moves.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate, and when redeemed, may be worth more or less than when originally invested. This information should not be construed as investment, tax, or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting, or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.
1. The Wall Street Journal, July 31, 2020
2. FactSet Research, July 31, 2020
3. FactSet Research, July 31, 2020
4. CNBC.com, August 31, 2019
5. MarketWatch, August 1, 2019