Conway’s QuickTake: Week of July 27, 2020
Here’s What Happened Last Week:
U.S. Equities were mixed for the week after jobless claims increased and the coronavirus outbreak continued to be a global concern. The S&P 500 Index briefly touched its highest level since its all-time high in February but ultimately fell by 0.3% week over week. The Nasdaq Composite Index fell by 1.3% as technology led all sector declines. Last week’s best performing sector, energy, rose by 2.3% for the week after oil prices increased. Clouding investor sentiment was the fact that no additional stimulus bill is yet passed by Congress as the current $600 per week unemployment benefits expires on July 31st. Talks have resumed on this topic over the weekend as U.S. Treasury Secretary Steven Mnuchin said the Trump administration supports a new package to extend the benefits through the end of the year, albeit at a lower wage than the current $600. Small-cap and large-cap stocks fell by about the same percentage for the week, while the mid-cap segment outperformed them both.
The week began with some positive vaccine-related news. The vaccine candidate being developed by Oxford University and AstraZeneca was reported to have produced strong levels of antibodies and T-cells in roughly 1,000 participants involved in the study. Then Tuesday brought the encouraging news of the new relief package passed by the European Union. In the U.S., an additional stimulus deal is still being discussed. If a deal is reached, it will likely provide longer-term relief funds to the unemployed but at a much lower weekly level than $600. The rationale is to provide enough of a benefit while also re-incentivizing people to return to work. Initial jobless claims filed through the week ending July 18th, surprisingly rose to 1.4 million compared to 1.3 million for the week prior and represents the first increase in this figure in 16 weeks. Continuing claims decreased to 16.2 million but is reported on a two-week lag, implying this figure only represents data through July 11th.
International Equities were also mixed after the European Union finally agreed to a €750 billion economic relief package. Developed international countries like Italy, the expected largest recipient of relief funds, did well as the MSCI EAFE Index rose by 0.4% in USD terms. Likewise, the MSCI Emerging Markets Index was positive last week after it rose 0.6%. Chinese equity indices fell after the Trump administration forced the closure of the country’s consulate in Houston, Texas.
In other positive news out of Europe, the Flash Eurozone PMI Composite Output Index rose to 54.8, firmly in expansion territory, while manufacturing and services areas of the economy picked up. Japan recently saw an increase in new coronavirus cases after it removed its state of emergency status two months ago. China is still grappling with the impact of Covid-19 – a recently conducted survey of 1,600 Chinese workers in 129 cities by China Reality Research indicates that one-fifth of the country’s employers were operating at less than 60% of their specific pre-pandemic levels of production. This led some people to believe the nation still has a road ahead before a full economic recovery is in place.
Credit Markets rose for the week after rates across the yield curve decreased. The benchmark 10-year U.S. treasury yield fell by 4 bps to end the week at 0.59%. Municipal bonds benefitted from strong net inflows which significantly offset the outflows the sector experienced earlier this year due to the coronavirus. Both the investment-grade and high-yield segments of corporate bonds appreciated attributable to the issuance of new deals and positive inflows.
Monday, July 27, 2020
•Germany – Ifo Business Climate (July)
•US – Durable Goods Orders, Dallas Fed Manufacturing Index
Tuesday, July 28, 2020
•US – S&P/Case-Shiller Home Price Index
Wednesday, July 29, 2020
•US – Fed interest rate decision
Thursday, July 30, 2020
•Germany – Unemployment and GDP Growth numbers
•Euro area – Consumer confidence, Unemployment rates
•US – GDP Growth, Jobless figures
•Japan – Unemployment figures
Sources: Trading Economics, The WSJ, T. Rowe Price Global Markets Weekly Update, This Week in Muniland (Alliance Bernstein)
Data in this report is obtained from sources which we believe to be reliable, but we do not warrant or guarantee the timeliness or accuracy of this information. It is provided for your information and guidance and is not intended as specific advice and doesn’t not constitute an offer to sell securities. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss. The Wilshire 5000 Total Market Index measures the performance of all U.S.-headquartered equity securities with readily available price data. The Standard & Poor’s 500 Index (S&P 500) is an unmanaged group of securities considered to be representative of the stock market. The Russell 2000 Index is a market-cap weighted index comprised of the smallest 2,000 companies within the Russell 3000 Index, a larger market-cap index made up of the largest 3,000 publicly traded companies in the U.S., nearly 98% of the investable U.S. stock market. The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index designed to measure the equity market performance of developed markets, excluding the U.S. and Canada. The MSCI Europe Index captures large- and mid-cap representation across 15 Developed Markets countries in Europe, covering approximately 85% of the free float-adjusted market capitalization across the European Developed Markets equity universe. The MSCI Emerging Markets (EM) Index captures large- and mid-cap representation across 26 Emerging Markets countries, covering approximately 85% of the free float-adjusted market capitalization in each country. The MSCI Japan Index captures large- and mid-cap representation of the Japanese market, covering approximately 85% of the free float-adjusted market capitalization in Japan. The Bloomberg Barclays U.S. Aggregate Bond Index is a market capitalization-weighted index comprising Treasury securities, Government agency bonds, mortgage backed bonds, corporate bonds, and some foreign bonds traded in the U.S. The Bloomberg Barclays Global Aggregate Ex U.S. Index measures the performance of global investment grade fixed-rate debt markets that excludes USD-denominated securities. The Bloomberg Barclays Municipal Bond Index covers the U.S. dollar-denominated long-term tax-exempt bond market. Created by the Chicago Board Options Exchange (CBOE), the Volatility Index, or VIX, is a real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Data in this newsletter is obtained from sources which we, and our suppliers believe to be reliable, but we do not warrant or guarantee the timelines or accuracy of this information. Consult your financial professional before making any investment decision. Past performance is no guarantee of future results. Diversification/asset allocation does not ensure a profit or guarantee against a loss.