Week Ending: August 21, 2020
U.S. stock prices were generally higher last week as the S&P 500 Index recorded the fastest recovery on record. It only took 126 trading days for the index to reach its prior peak which was over 10 times as fast as the average historical rebound. Both size and style were outsized factors as large growth stocks outperformed small value stocks by more than 6.5%. The energy, financials, industrials, and utilities sectors ended the week in negative territory. Information technology, consumer discretionary, and communication services were the top performing sectors. Developed foreign stocks in Europe and Asia lagged U.S stocks while Emerging Market stocks outperformed developed foreign markets.
U.S. Treasury yields declined this past week (bond prices and yields move in opposite directions) as demand returned to higher quality and longer duration bonds. Long-term treasury bonds were the top performing segment followed by investment grade corporate bonds. While near term demand for credit risk may have declined, investment grade corporate bonds are yielding approximately 2% and high yield corporate bonds are yielding more than 5.5%.
Initial unemployment claims unexpectedly rose this week to 1.1 million. However, the number of unemployed Americans filing continuing claims fell more than expected, and reached its lowest number (14.8 million) since early April. July housing data was encouraging with increases in housing starts and permits while existing home sales rose more than expected and surpassed their best level since December 2006. Economic readings in Europe and Asia were mostly negative as Europe reported worse than expected PMI data and Japan announced that second quarter GDP declined by nearly 8%.