Week Ending: September 4, 2020
U.S. stocks declined last week after major benchmarks crossed or approached all-time highs. Company size was negligible, while value stocks provided more downside protection and outperformed their growth counterparts. Defensive sectors such as utilities, consumer staples and real estate outperformed whereas the energy, consumer discretionary, information technology, and communication services sectors lagged. Developed foreign stocks in Europe and Asia outperformed U.S stocks while Emerging Market stocks outperformed developed foreign markets.
U.S. Treasury yields were mostly unchanged this past week (bond prices and yields move in opposite directions) as investors ended the week seeking higher quality investments. Long duration investment grade corporate bonds were the top performing segment followed by long duration government bonds. High yield (below investment grade) corporate bonds generally lagged, but managed to outperform relative to other short duration bonds. Investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5.5%.
Initial unemployment claims declined this week to 881,000, but more importantly, the Labor Department reported an addition of 1.4 million jobs in the month of August. The number of unemployed Americans filing continuing claims dropped to 13.1 million. European leaders such as ECB Chief Economist Philip Lane are concerned about recent Euro currency appreciation which rallied to more than USD 1.20 for the first time since 2018. In Japan, the search for a new candidate to replace retiring Prime Minister Shinzo Abe has intensified, while Berkshire Hathaway made headlines when the company announced that it invested $6 billion in Japanese stocks.