ICYMI: Week of July 20th through July 24th: Meet the Opposites
I hope you’re enjoying your weekend, and you’re making strides toward your to-do list and your goals despite the pandemic.
Why should you pay attention to economic indicators and not just the markets?
It’s because while watching the markets give you a good insight into how your investments are performing day-to-day, reviewing economic indicators can inform your overall strategy. Some indicators are better than others, often depending on the country, you’re evaluating. Still, there are some that you should make a note of as you plan your investment strategy.
This week, the markets were mixed in the U.S. Europe reached an unprecedented deal to help lessen the economic impact of Covid-19 and U.S./China relations tested once again.
Let’s take a look across the globe.
In the U.S., economists are warning that there is a possibility of a double-dip recovery. It’s almost a certainty if the additional $600/week unemployment benefit ends. A double-dip recovery is one in which what appears to be a sharp recovery to pre-recession levels is quickly followed by a shorter and smaller decline before the economy returns to pre-recession levels. While Congress has agreed to pass another stimulus bill, the amount of the benefit and timing is unknown.
What does this mean for you as an investor?
If we have a double-dip recovery, brace yourself because it means we’re not out of the woods yet, and there’s still a potential for things to get terrible, very quickly before getting better.
Also, on the unemployment front, the most recent report from the Department of Labor shows that the number of initial jobless claims filed is increasing, not decreasing with 1.4 million new claims filed.
New home sales and existing home sales, two lagging indicators, showed an increase in the housing markets. New home sales rose by 13.8%, and existing home sales were up by almost 21%.
Stocks continued their slide after the closure of the Chinese consulate in Houston (see below) and mixed earnings from Intel, Microsoft, and American Express. Microsoft’s reported earnings beat estimates. Earnings Per Share of $1.46 on revenue of $38 billion, but that wasn’t enough to help the company’s stock.
The massive recovery fund deal reached by European leaders this week aimed at boosting the economies of the 27 EU nations. The $800 billion package aims to help businesses impacted by the pandemic, reform EU economies and provide protection against “future crises.” The European markets were up as a result of the deal.
The Bovespa Index, the benchmark index for the Brazilian economy, was up 88 points on Friday amid rumors of a possible interest rate cut and news of a slight uptick in economic activity.
In Chile, President Pinera signed a law allowing people to make early withdrawals from their pensions. While the law could help boost the economy in the short run, it may have an unintended effect because pensioners may have to liquidate their assets to make the withdrawals losing out on the opportunity for their money to grow.
There was a record number of new Covid-19 cases in Japan this week as the economy continues to reel from the pandemic. The health ministry approved the use of the steroid drug dexamethasone as a treatment for Covid-19.
The Nikkei 225 closed the week slightly lower (-0.59%) at 22,749. The markets were closed on Thursday and Friday due to holidays.
Tensions continue to mount between the U.S. and China. This week, the Chinese consulate in Houston was abruptly shuttered by the U.S. China followed suit and demanded the closure of the U.S. consulate in Chengdu, part of the Sichuan province. There were continued losses in the markets, and the Shanghai Composite was down 0.54% for the week.
South Africa has formulated a plan for four sectors of the economy to revive the economy after the pandemic. The Trade and Industry Minister highlighted a plan to tackle growth in “auto production, clothing and textiles, poultry, and sugar.” The plan, coupled with the central bank cutting the cash rate by 25 basis points, was not enough to excite the markets. South Africa’s FTSE/JSE Africa All Shares Index is down a little over three percent year-to-date.
Some numbers for people who like numbers:
The Dow Jones Industrial Average closed at 26,469 down 0.7% for the week
S&P 500 closed the week down 0.3% ending at 3,215
Nasdaq was down 1.3% from the previous week ending at 10,363
MSCI EAFE closed at 1,859 up .4%.