Zacks Investment Management

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:

• Inside the housing market’s v-shaped recovery
• The S&P 500 reclaims all-time highs
• The long-term trend points to a full economic recovery

The U.S. Economy Has a ‘Hot Spot’ – Housing – Economists and analysts on the news continue debating the shape of the economic recovery, whether it’s “v-shaped,” a Nike swoosh shape, or even W or L. But one sector has emerged as looking distinctly like a v-shaped recovery: housing. In the month of July, housing soared 23% from June, hitting an annual pace of close to 1.5 million. The housing sector declined in-line with the broader U.S. economy in the spring, but has since climbed back to pre-pandemic levels in terms of housing starts and construction. Consumer spending on furniture, appliances, and home improvement has outperformed spending across most other sectors, and construction employment has recovered briskly. One familiar name in the space, Home Depot, underscores the sector’s strength: the company posted its best quarterly sales growth in nearly 20 years. The National Association of Home Builders said this week that its housing index touched its highest level since 1985, with current sales, expected sales, and foot traffic all growing firmly. The housing sector is no doubt benefiting from historically low interest rates, which appear poised to remain low for years to come. Additionally, the ‘work-from-home’ movement may be spurring new and existing homeowners to upgrade for more and better office space.¹

New Housing Starts Show a “V-Shaped” Recovery

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7 Reasons to Stay Bullish!
 
While the first half of the year was volatile to say the least, now we are seeing new highs in the market. This begs the question – what is in store for the remainder of 2020? We look at this answer in our just-released market strategy report.
 
In this report, we’ll take a look at who the leaders of the rally were (and are), take a walk down memory lane to look for lessons from old investing legends, and give readers seven reasons to stay bullish in the uncertain year ahead. 
 
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!
 
Download Our Just-Released August Market Strategy Report³

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The S&P 500 Index Reclaims All-Time Highs – Many investors remained baffled by the stock market’s surge, even as the economy struggles to regain pre-pandemic footing and even as Covid-19 continues to spread. Technology shares continue to be a driving force behind the market’s strength, but recently we have seen some rotation showing other cyclical categories rallying as well. Small-caps and industrials have surged in August, and economically-sensitive sectors like Energy have also seen strong relative gains in recent weeks. For investors thinking that “what goes up must come down,” and/or that the stock market is wildly overvalued, we would advise against the temptation to time the markets. In our view, the equity markets tend to price-in economic outcomes six or even twelve months from now, meaning that rising prices likely reflect a post-pandemic economic and earnings rebound.⁴ What’s more, money supply growth via Federal Reserve policy and fiscal spending currently exceeds nominal GDP growth, which tends to result in extra liquidity flowing through the capital markets. This “wall of liquidity” has the potential to push asset prices even higher, in our view.⁵

The U.S. Economic Recovery is Underway, But Not Quite Robust Yet – Recent economic data paints a picture of a U.S. economy that is trickling back to life, but not quite in full force. July marked the third consecutive month that retail sales ticked higher, and importantly July sales were 1.7% higher than levels seen in February (the month before the pandemic-induced shutdown). Consumers were spending across virtually all categories, from home appliances to furniture, to electronics, health products, and food. Early data shows that August retail sales may taper off slightly, particularly as the extra $600 unemployment benefit runs out and as Congress debates the next round of stimulus. Other economic data points to a ‘mixed’ picture regarding the economic recovery.⁶ The New York Fed’s Empire State survey, which tends to be a bellwether indicator for other Fed surveys across the country, showed manufacturing activity slowing from July to August. To say the economic recovery is losing momentum in the short-term may be accurate, but we believe long-term the trend still points to a full economic recovery – and then some.

What is in store for the remainder of 2020? We look at this answer in our just-released market strategy report.⁷ In this report, we’ll take a look at who the leaders of the rally were (and are), take a walk down memory lane to look for lessons from old investing legends, and give readers seven reasons to stay bullish in the uncertain year ahead. 
 
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