by Maurice (Mo) Spolan, Investment Research Analyst
The S&P 500 was up 0.7% last week, as the index now rests less than 1% below its February all-time highs. The Barclay’s Aggregate Bond Index, by contrast, was down 0.9% as interest rates rose (bond prices decline when rates increase).

The headline economic figures of the week pertained to consumer spending, jobs and inflation. Retail sales increased 1.2% in July, a sharp deceleration from June’s 7.5% gain, but still a healthy figure in the midst of a pandemic. On the jobs front, unemployment claims fell below 1 million for the first time since March, an indication that Americans are returning to work. Last, inflation jumped 0.6%, the largest one-month increase since 1991. However, CPI is running at a moderate annualized pace of 1.6%, below the Fed’s 2% target, and more sustained hints of inflation will be required before the central bank adjusts its highly-stimulative stance.

As the presidential election looms less than three months away, Joe Biden made news by selecting Kamala Harris as his running mate. The Wall Street Journal reports that traders are bracing for a choppy finish to the year, as market volatility has historically been above average during election seasons. Also, in the political sphere, Congress broke for summer recess without passing another round of stimulus. While President Trump hopes to provide support by way of executive order, the constitutionality of his plan remains in question. The economy, particularly the consumer, is likely to suffer if no further fiscal stimulus is delivered. 

by Maurice (Mo) Spolan, Investment Research Analyst
U.S., international and emerging market equities were all up between 1% and 3% last week. Fixed income indices, such as the widely followed Barclay’s Aggregate, have provided returns only slightly above zero over the last month, a result of the historically low rate environment in which investors are participating.

The U.S. added about 1.2 million jobs in July, a considerable deceleration from the 4.8 million added during June. While employment gains are certainly welcomed amidst a global pandemic, the slowdown may indicate the unfortunate possibility that new job growth is plateauing. This is troublesome because the unemployment rate remains very high, at 10.2%.

With Q2 corporate earnings almost complete, S&P 500 constituents have experienced an aggregate decline in earnings of 33%, the greatest year-over-year stumble since 2008. With that said, analysts expected earnings to erode by 40%, so companies have beaten expectations.

As Democrats and Republicans remain distant in their proposed stimulus packages, President Trump signed an executive order over the weekend to provide fiscal support. Whether the order will actually come into effect, however, is uncertain, as several legal analysts believe that it is unconstitutional for the president to supersede congressional spending authority.