This week the stock market adjusted lower on fears of a fading economic recovery and the need for further massive stimulus springing from the growing spread of COVID-19. The S&P 500 and the Dow slipped, breaking a string of three weekly gains in a row, while the NASDAQ underperformed its peers, recording its second consecutive weekly decline. Momentum shifted, as the market’s gains early in the week were offset by declines on Thursday and Friday. We could see a move back into the high flying stocks as Apple, Google, Amazon and Facebook all report earnings this coming week.
Covid On the Rise
Since mid June, the five-day moving average of new confirmed cases has jumped from just over 20,000 to just over 73,000. Markets are not reacting the way they did in March to the spike in cases because of the positive developments on the vaccine front. The resurgence of the disease is slowing, stalling and, in some cases, reversing, the staged reopening of the economy and will likely continue to hobble the restaurant, hotel, travel, entertainment and retail industries. The pandemic slows business investment, hiring and lending decisions across the economy, which is why we will get another stimulus package from the government. Money being spent to pump stimulus into the economy today could eventually lead to higher taxes and inflation in the future which could potentially reduce your purchasing power in retirement.
Results Aren’t as Bad as Feared
The S&P 500 nearly unchanged for the year which suggest a risk of a correction. There are however still opportunities over the longer term, maintaining equity exposure allows you take advantage of an economic surge once COVID-19 has been tamed. Although corporate earnings are in sharp decline, second-quarter earnings are coming in a bit better than expected, based on results from the roughly one-quarter of S&P 500 companies that had released numbers as of Friday. Quarterly earnings are now projected to decline of about 42%, compared with the 44% drop that had projected a week earlier.
Is it Time to Sell Your Home or Refinance?
The U.S. housing market is posting record month-to-month growth after falling sharply in the spring as a result of the pandemic. Sales of existing homes jumped 21% in June, compared with the previous month, according to the National Association of Realtors. That’s the largest monthly increase since tracking of the data began in 1968. That coincides with the yield of the 10-year U.S. Treasury bond falling on Thursday to its lowest level in three months, dropping to 0.58%. The recent decline in yields is a key reason why mortgage rates have been setting record lows.
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