5 Month Winning Streak

August 31, 2020

Coming into the month the S&P 500 had moved higher for 4 consecutive months and was 49% off the March low.  At some point the recession on Main Street is going to have an impact on the Wall Street rally, but in August technology stocks continued to lead a rally to new all-time highs for the S&P 500 and the NASDAQ Composite.  Technology stocks have been seen as immune to the COVID as the new “stay at home” economy has actually been a boom for them.  In addition, since it feels like we are all going to be spending more time at home, home prices and prices of stocks related to the home have soared in recent months and that continued in August.  Not only did the summer rally continue in August, it turned out to be the best rally for the S&P 500 in 34 years!  The S&P 500 hit a new all-time high every week during the month and at the end of the month the S&P 500 had gained 7%, is now up 8.4% for the year and 59.7%% off the March low.  Gold had a volatile month, hitting a new all-time high above $2000 an ounce for the first time before ending the month little changed.

The month got off to a good start with shares of Apple in the lead.  Their announced 4:1 split on the 8/31 ignited a 35% rally in the shares to a new all-time high and Apple is in nearly every major index.  During the first week we learned manufacturing expanded for a second straight month, initial claims for unemployment hit the lowest level since the pandemic began and a better than expected 1.76 million new jobs were created in July.  At the end of the week the S&P 500 had gained 2.4%.  Vaccines took center stage during the second week with Russia saying they have the first government approved vaccine and several U S companies reporting promising progress.  First time claims for jobless benefits dipped below 1M for the first time since the pandemic and retail sales were better than expected.  At week’s end the S&P 500 had added another .7%.  The 3rd week we saw more evidence that the housing market is red hot as we all come to realize we are going to be spending more time there.  Homebuilder sentiment hit an all-time high and home sales were 25% above last year with prices at the highest level ever.  The Federal Reserve did say the pandemic poses considerable risk to the economy over the medium term and that did keep a lid on the rally.  The S&P 500 was up .7% for the week.  During the last full week of the month the big news was a shakeup in the Dow Industrial average as a result of Apple’s upcoming split.  Dow Jones removed Exxon, Pfizer and Raytheon from the index and replaced them with Salesforce.com, Honeywell and Amgen.  Because the Dow is price weighted the split in Apple will reduce their influence by 75%.  We also learned Abbott Labs has developed a 15-minute COVID test that will sell for $5, this ignited a rally in the “reopening” stocks and gave the S&P 500 the best performance of the month, up 3.3% for the week.

September is traditionally the worst month of the year for the market.  It is the only month that has an average return in negative territory and the only month that has been down more often than up.  After gaining nearly 60% during the 5-month rally off the March low it is logical to expect a pullback at some point, and September would seem like a good candidate.  It will be interesting to see what Apple’s diminished role in the Dow Industrial average will have on that index.  The rally has been driven by technology stocks, many of whom are at price to earnings ratios that suggest elevated levels.  We would expect volatility to increase as we get closer to the election, as the 2 months preceding a Presidential election have traditonally been weak.  Despite all of this caution, we do not see major downside.  A 5% to 10% correction is overdue, but with the Fed still pumping money into the economy and a vaccine on the horizon, it is hard to envision a major move lower. With that said, we are going to be more defensive ahead of the election.

If you know someone who would be interested in learning more about Greenberg Financial Group, or who is retired or thinking about retiring, or would simply like us to review their current portfolio, please contact us at 520-544-4909, or visit our NEW website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio. You can follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group.

 

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