Weekly Market Recap
Deal of the Day: Chase is now offering a $200 cash bonus when opening a Total Checking Account. No minimum deposit and all deposits are FDIC insured up to the $250,000 per depositor maximum.
The Markets Have Seen Record Climb
Yesterday was the 100th stock market trading day since the market bottomed out on March 23rd. And, boy, was there a lot to be excited about. Over the past 100 trading days, the S&P 500 has jumped more than 50% since the low in March. This is the largest rise in a 100-day trading period since 1933. The Dow has gone up about 50% as well, while the NASDAQ has seen about a 60% climb since those March lows.
And what else happened in the 30s? The Great Depression. While it’s too soon to draw those types of comparisons, both events resulted in a massive drop in the market, followed by a significant rebound (though the timings were different during the 30s–this was a longer period). Still, though, it’s exciting to see such a huge climb back after tanking in March.
I’ve been waiting for the shoe to drop but it still hasn’t. Those of you that have been keeping up with my updates know that I’ve been expecting a market correction, but we’ve yet to see it. It’s still too early to say whether the market will drop in light of the continual COVID cases and deaths, but it’s something to keep in mind.
Vanguard Studied Panic-Sellers
Vanguard looked at a small subset of their clients who decided to move to cash-heavy portfolios during the pandemic out of fear. Based on what you just read above, it’s easy to see they didn’t fare so well. In a split study looking at two investor groups, Vanguard found that 8 and 9 out of 10 clients, respectively, had worse returns by May than they had when they panic-sold.
The study is really interesting, and you can read all about it here, but the key takeaway is to never panic-sell. The stock market has highs and lows, and we are going to see more of these highs and lows in the future. But if you panic-sell when the market goes down, you’re going to miss out on massive gains when it eventually rebounds. As JL Collins says, the market always goes up.
Surprising Drop in Unemployment Claims
The most recent job report shows that jobless claims dropped below 1 million for the first time in months – hitting about 963,000 in early August. Still no small number, but a far cry from the roughly 1.5 million we were seeing every week over the last few months. So why such a big drop?
While there’s no strong data to back it up, many experts are arguing that since the additional $600 unemployment credit ended at the end of July, people were more incentivized to go back to work.
Now, again, this is a heated debate and nothing can be said for sure, but chief economist Stephen Stanley of Amherst Pierpont Securities was quoted as saying “This is not rocket science, folks. When you pay people more to sit at home than to go back to work, they sit at home.” Meanwhile, a Yale study found no clear evidence.
Regardless, it’ll be important to keep an eye on jobless claims for the next several weeks to see how it trends, and if an impending stimulus package will change the trend at all.
What to Watch for Next Week
Next week will be another busy one–here’s what to look for:
- Monday, 8/17: Empire State index for August – which measures manufacturing in New York; The NAHB home builders’ index for August – which gauges current and future home sales for single-family homes.
- Tuesday, 8/18: Housing starts for July – which tells us how many new homes have started construction; Residential building permits for July – which may be an indicator of consumer confidence.
- Wednesday, 8/19: Meeting minutes from the July 28-29 Federal Open Market Committee.
- Thursday, 8/20: Jobless claims report for August 15th; The Philly Fed Index for August – which measures economic indicators from the Philadelphia Federal Reserve; Leading economic indicators report for July.
- Friday, 8/21: Existing home sales report for July; Markit manufacturing and services reports for August – which measure both industries’ growth or decline, respectively.
Invest Your Money
Tired of trying to time the market? Let a robo advisor do the work for you. Below is a list of the best robo advisors and a brief description on which type of investor each one is best for.
|Ally Invest||Portfolio diversification|
|Wealthfront||First time investors|
|Personal Capital||Large investors|
|Acorns||Students and young investors|
|M1 Finance||Customizing your portfolio|
|Wealthsimple||Unique investment options like SRI|
|Vanguard Personal Advisor Services||High net worth, buy and hold investors|