August 31, 2020

Another week passes with no progress on a Stimulus Package agreement in Congress. However, this didn’t slow the stock market down at all. While the market continues to go up, economic data is showing some signs of slowing growth. We discuss that and much more in this week’s blog.

Here are the top data points we’re covering this week’s blog:

1. The Market

· The S&P was up 3.35% on the week as momentum continues to the upside after the S&P hit an all-time high last week. Most of the return is still being driven by a narrow set up to top tech names and volatility was back on the rise most of the week, even with market up each day last week. This has historically been a warning sign of potential exhaustion in the markets with both price and volatility going up at the same time.

2. Economic Data

· New claims stayed above 1 million again this week, making it 22 our of 23 [MG1] [MG2] weeks that we have seen over 1 million in new claims.

· Continuing claims came down very slightly, still over 14 million.

· Total Claims for Unemployment from all programs dropped to around 27 million with the largest drop coming from the decline we have seen recently in continuing claims.

· Pending home sales have gone up significantly, showing significant demand in housing.

One thing to watch here is the level of supply. You can’t buy what is not on the market so while demand may remain high, we may begin to see some weakness in these numbers due to just not having many homes available to buy.

· Consumer Confidence fell in August to the lowest level in 6 years. After popping up in June as the economy began to open up, we have seen 2 straight months of declines with lingering COVID and unemployment concerns leading to increased worry about the economy.

· The final chart in a busy week of economic data is the Chicago Fed National Activity Index. This chart brings together a significant amount of data from across the economy to determine if that data is above or below trend. The good news is that the data has remained above trend for July, however, just like with Consumer Confidence, it is beginning to show some weakness as we get deeper into the summer, rather than showing a continued acceleration.

Articles of Interest

Inflation – The Fed has announced a shift in policy. Over the last number of years, they have had an inflation target of 2%. They are now indicating that they are okay with inflation running above that for a period of time because we have been below 2% for so long. My question is: Why does the Fed want inflation to be above 2%? Who does that help?

Click here to read the article.

· Challenges ahead for homeowners and renters – We have talked about this a few times in the last couple of months an this article brings a lot of data to show some major issues ahead for those that are behind on their mortgage and rent payments.

Click here to read the article.

Social Media Post of the Week

This has been a particularly challenging year for small businesses. We have started a 3-part blog series on how business owners can bring more predictability to their business in these challenging times to survive and thrive going forward. Part 1 is on how to create Predictable Profits and Cash Flow. Here is our post from earlier this week.

Don’t forget to follow us on your favorite Social Media Feeds!!

Non-Financial Story of the Week

With 2020 being such a volatile year in the stock market, it is important to remind myself that with many of our clients, what happens in the market is really not the most important thing that we do.

Are you making small talk to big talk? I watched this TED Talk last week that had a very interesting point of view on having meaningful conversations. With everything going on in the world I thought this was a good reminder on how we can be approaching conversations to better understand where we are all coming from. I really appreciate that a big part of the work we do with our clients is asking the big talk questions – what are their most important values, goals, achievements, fears. Yes, I still will sprinkle in small talk about the weather – and the Seahawks if they are willing to listen – but I am lucky to be in a position to learn about the things that really make our clients tick and be a part of their journey.

Bottom Line

It was another great week in the stock market as economic data continues to be mostly ignored with the confidence in the Fed to continue to provide the necessary liquidity to the markets. Unemployment remains high and other indicators are showing some weakness in the recovery. We will see if any of this has an impact on the markets or whether the belief in the Fed narrative will continue to drive the market to new all time highs.

If you have any questions about any of the information in this week’s blog or what you should be doing right now with your personal and business planning, do not hesitate to reach out to us by sending an email to info@konvergentwealth.com or calling us at 253-236-7000.

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