Markets “In A Nutshell” for September 22, 2020

Markets “In a Nutshell” for September 22, 2020

Investment Week at a Glance

Stocks finished with mixed results for the week.  The Dow Jones Industrial Average was down 0.03%, the S&P 500 fell 0.64%, the New York Stock Exchange Composite (2,000 stocks) rose 0.47% and the average investors index (Value Line Index) was up 1.23%.  Foreign stocks (DJ Global ex U.S.) were up 1.05%.  Bond prices were lower for the week, with the 10-year U.S. Treasury ending the week 3 basis points higher at 0.70%.  (Data source: Wall Street Journal)

Small Cap & Foreign Stocks Outperform

Stocks produced mixed results this week with major U.S. indexes showing flat to modest losses, but digging deeper into the individual stocks shows a compelling case for the future leaders of the market. The technology sector has been hit hard in recent weeks, down 8% since the beginning of September, while Small Cap and Foreign stocks have begun to pick up steam, especially in the past week. Small Cap stocks’ performance is notoriously sensitive to economic activity and after the Federal Reserve revised their estimate of economic growth in the U.S. to be better than what was previously expected, Small Cap stocks soared, with the Russell 2000 index rising 2.64% for the week. Foreign stocks also showed more life last week and look poised to rebound after significant underperformance to the U.S. this year. Both scenarios would be beneficial to the health of the economic rebound globally, which has up to this point been centered almost solely around the largest U.S. technology companies. (Barron’s)

Pace of Economic Gains Slows

Last week’s economic data showed continued progress to a full recovery, but the pace of gains has slowed and has brought about anxiety on how quickly the U.S. and rest of the world can get back to the economy of last year. Retail Sales, one of the broadest measures of consumer spending reported by the U.S. government, showed a slight rise in August and impressively were more than 2% higher than February of this year, but were still lower than expected and dampened hopes that the biggest contributor to the economy could continue to accelerate faster. Initial unemployment claims have been relentlessly high and that was the case again last week with another 800 thousand claims filed for the first time. While much progress has been made since the depths of March and April, the continued grind higher in these economic indicators will be essential to removing the scars the pandemic has produced. (Barron’s)

Quiz:

Over the past 10 years, by what annualized percentage has the S&P 500 outperformed foreign stocks?

1.   2.2%

2.   5.3%

3.   8.4%

4.   12.8%

 

 

 

 

 

 

 

 

 

 

 

Answer below.

 

 

 

 

Have a Great Week!

 

 

 

 

 

 

 

 

 

 

 

Answer:

    3.   The S&P 500 has outperformed foreign stocks by 8.4%, with the S&P 500 returning 13.9% per year and the rest of the world returning 5.5%. (Barron’s).