In today’s Steady Investor, we look at key factors that we believe are currently impacting the market and what could be next for the markets such as:
U.S. Services Rebound Better Than Expected – The economic picture in the U.S. remains mixed and in flux. As of the end of the second quarter, over 40% of the U.S. had reversed reopening plans or placed them on hold, and cases continue to grow at a rapid pace. Even still, investors should remember that recessions end when economic growth starts – even if the growth only amounts to a trickle. Manufacturing and services data suggests that the economic recovery, at least so far, has been better than a trickle. Two separate purchasing manager surveys indicated that demand stabilized in June and that orders were picking up. Job losses also slowed, a sign that the worst of the crisis is behind us. The ISM non-manufacturing report (measuring services) showed business activity in expansion mode last month, with the PMI reading topping 50. The Markit non-manufacturing survey showed a “v-shaped” bounce in activity as well, though not quite to expansion territory. Both surveys exceeded economists’ forecasts, which has been a common theme throughout this nascent recovery. Over 80% of industries surveyed reported growth, and respondents struck a cautiously optimistic tone about demand returning over time. The services sector accounts for around two-thirds of the U.S. economy, so improving data is meaningful as we head into summer.1
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News Keeps Getting Worse But Markets Keep Going Up, See Why?
In our just-released July Market Strategy report, we take a look at why the markets keep going up even in the midst of the current pandemic, job losses, and economic shutdowns.
In this report, we’ll explain how and why the market can tell one story, while the economic data and news cycle tell another. We will also take a look at possible projections for the S&P 500 this year and beyond while offering readers some advice for navigating uncertainty in the current environment.
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free report today!
Click Here to Download Our Just-Released July Market Strategy Report2
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Data Shows Paycheck Protection Program (PPP) Loans Extended Far and Wide – The U.S. government made public this week the recipients of PPP loans, and analysis shows that the loans cast a wide net across the small business landscape. More than 90 industry sectors each had 10,000 companies receive PPP loans, with over 260,000 restaurants and 150,000 businesses in the personal care services, management consultants, and legal services also receiving funds. In total, the number of jobs that were supposedly saved by the loans (jobs claimed by the businesses receiving loans) hit 51 million, an astounding number if accurate. It is unclear what these companies would have done without the PPP money, however. For instance, many companies in the technology sector – where demand remained steady throughout the crisis and where remote work is common – may have kept payrolls fairly steady even without government loans. There are also certainly cases of well-connected businesses with national presence receiving loans on the higher end of the spectrum, in the range of $5 million to $10 million.3 Because the program was rolled out so quickly, it is difficult to ascertain whether a significant portion of the PPP money went to businesses that actually needed it.
Will China Live Up to Its Trade Deal Commitments? One of the key features of phase one of the trade deal with China was a commitment to purchase tens of billions of dollars’ worth of U.S. agricultural, manufacturing, and other goods like natural gas, oil, and coal. So far, China has made only a small dent in its commitments. As of May, it had purchased $5.4 billion of the promised $33 billion in agriculture; $19.5 billion of the promised $84 billion in manufacturing goods; and a paltry $2 billion of the promised $25 billion of U.S. energy (with even more committed for the year 2021).4 Of course, China could always ramp-up its purchases heavily in the back half of the year, but doing so in a way to reach the targets across the board seems unlikely at this phase. The question for investors is, will the trade deal break down as a result and snap the U.S. and China back on economic relations that have already soured significantly in light of the trade war and pandemic? This will be an issue to watch closely in the second half of 2020.
News Keeps Getting Worse, and Markets Keep Going Up. How? Looking back at the S&P 500’s -34% plunge from its February highs, it is easy to wrap one’s head around why the
market fell so quickly and sharply. The pandemic forced a global economic shutdown, driving developed economies around the world deep into recession. As job losses continue to mount, the stock market has surprised many with its powerful bounce since March 23. How could the market be rallying so convincingly amidst all of the current economic pain?
In our just-released July Market Strategy report,5 we take a look at why the markets keep going up even in the midst of the current pandemic, job losses, and economic shutdowns. We will also take a look at possible projections for the S&P 500 this year and beyond, while offering readers some advice for navigating uncertainty in the current environment.
If you have $500,000 or more to invest and want to learn more, click on the link below to get your free report today!
Disclosure