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Week of August 17, 2020 Thumbnail

Week of August 17, 2020


We hope this finds you safe and well, as always.  Last week the markets digested a rich trove of economic data, the majority of which was good or better than expected.  Equities responded in kind, with most sectors grinding higher:

  • All four major stock indices registered gains for the week, and the S&P 500 came very close to its all-time high.
  • Jobless claims surprised the experts with a solid beat; initial unemployment claims were below 1 million for the first time in 21 weeks.
  • Inflation also surprised economists, registering a 0.6% monthly increase in July, matching June's also-hot reading; this bears watching.

View the full recap of last week's events in the link, below. 

The markets have been shifting, almost on a daily basis, between two thematic drivers: the new world of working at home vs. a traditional cyclical recovery.  While there can no longer be any doubt that work arrangements for broad swaths of the labor force will be changing on a prospective basis, it's difficult to assess how much damage is being done to the real economy as COVID lingers and policymakers fail to provide additional recovery funds.  The longer the disfunction persists, the wider the gulf between sky-high stock prices and the fundamental economy becomes.  At some point, companies will have to deliver on earnings.  We don't want them to be permanently impaired so as to make those prospective earnings a mere fantasy.

It's worth repeating a point we made much earlier in the summer... we're in a race against time to get American workers back on the job - in a permanent sense.  Fiscal policy needs to support that overarching goal, and we cannot lose sight of that.  Retail sales held up remarkably well in July, but could come crashing back down if more relief does not come from Washington, D.C.  Those dollars are properly viewed as an investment in the future productive capacity of our economy, because workers' skills will atrophy if they are forced to downshift professionally for an extended period of time.  The demand side of the economy is not driving inflation higher, so policy makers have plenty of room to apply stimulus.  We urge them to do so.

Thank you, as always for the confidence you have placed in us.  We look forward to hearing from you and meeting with you (in person or via videoconference) to review your portfolio and update your financial plan.

Very best,




Market Insights - August 15, 2020

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