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No Summer Break for Stocks Monthly Market Outlook Update – August 31, 2020

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No Summer Break for Stocks Monthly Market Outlook Update – August 31, 2020 The Savides Group |Taking care of today for your peace of mind tomorrow. No Summer Break for Stocks Monthly Market Outlook Update – August 31, 2020 The dog days of summer often provide motivation to Though negotiations have stalled, it is widely expected that squeeze in a last-minute vacation or some activity to enjoy some form of additional government stimulus will be the warmer weather prior to the leaves falling and the approved in the coming month. State aid and approach of fall. The adage “Sell in May and Go Away” unemployment benefits are the key items that remain was somewhat borne of this summer slowdown. But being unsolved as the strength of the economic recovery has completely out of stocks during the summer of 2020 would reduced some of the urgency to tackle these areas. Should have been to an investor’s detriment, as there has been no an agreement not be reached, volatility could emerge as summer break for stocks. August capped off what was the additional stimulus is viewed as essential to prop up the fifth straight month of stock market gains since the COVID economy, particularly as it relates to local governments and pandemic hit, and the strongest August since 1986. 2020 the high levels of unemployed. has given us a lot of worsts, bests, and “not seen since” type In a late-month speech, Fed chairman Jerome Powell data and performance, and the most recently completed commented that interest rates could remain lower for longer month certainly lived up to that sentiment. than previously expected. Inflation has been running well The table below provides a summary of our three regularly below the Fed’s target of 2% for nearly a decade; moderate monitored market indicators. Graphs of those indicators inflation is viewed as positive and necessary to keep our are provided on the back of this page. economy growing. The new Fed “target” is to average 2%, Our meaning the Fed could let inflation run higher than this Market Related Factor Direction Market figure before they would consider raising rates. While this Outlook tends to be a positive for stock investors, those who rely on Stock Price Momentum 50- and 200-day moving Positive (S&P 500) averages trending higher interest payments from fixed income investments for their income needs are at a disadvantage. Corporate Profit Showed another month of Neutral Margins improvement Conclusion – Stocks did not take a summer vacation this Yields up across entire year, and we experienced the strongest August since 1986 curve, with further Shape of Yield Curve Positive steepening between 2- on the back of low rates, better earnings, and the continued and 10-year expectation of government stimulus. After five straight Stocks nearly unanimously cruised higher in August, as months of gains, seasonal weakness and stretched investor earnings continued to come in above expectations, interest sentiment along with the upcoming election and potential rates stayed low, and government stimulus remains on the for a second wave of the virus, pose risks to the rally. table. The S&P 500 moved 7.2% higher in August, and it If you have questions on how current market conditions was the usual sectors and companies that did the heavy might impact your longer-term goals, please contact: lifting as they have for most of 2020. Technology stocks returned 12% for the month; the sector now makes up The Savides Group 27.5% of the index and easily has the largest influence on Mark Savides, CFA, what happens directionally to the overall market. Consumer Diane Lightfield, CFA, CFP®, David Savides, discretion, communication services, and industrial stocks Josh Hagman also rose greater than the overall market. Energy and utility Private Wealth Management, Baird stocks were the only sectors to experience declines. 920.830.5540 or 888.711.6125 The S&P 500 Index is an unmanaged index commonly used to measure and report performance of various sectors of the stock market. Direct investment in an index is not possible. The Treasury Yield Curve relates the yield on a security to its time to maturity and is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. Past performance is not a guarantee of future results. Information in the data presented was gathered from sources deemed reliable; however, we cannot guarantee its accuracy. Numbers have not been audited. This is not a complete analysis of every material fact regarding any company, industry, security, or strategy. The opinions are those of the authors and not necessarily Baird, reflect our judgment as of this date and are subject to change. This document is provided for informational purposes only and should not be considered a recommendation. ©2020 Robert W. Baird & Co. Incorporated. Member NYSE & SIPC. Robert W. Baird & Co. 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. 1-800-RWBAIRD. www.SLKTLGroup.com First Use:9/2020 Market Outlook Indicators S&P 500 Index - Moving Average Indicator as of August 31, 2020 Source: Thomson One S&P 500 Price 50 Day MA 200 Day MA 3,400 3,150 Positive - 50- and 200-day moving 2,900 averages trending higher 2,650 2,400 2,150 1,900 S&P S&P 500 Index Value 1,650 1,400 1,150 900 650 2/9/12 2/12/13 2/12/14 2/12/15 2/12/16 2/13/17 2/12/18 2/13/19 2/13/20 02/03/98 02/03/99 02/02/00 02/01/01 02/07/02 02/07/03 02/09/04 02/08/05 02/08/06 02/09/07 02/11/08 02/10/09 02/10/10 02/09/11 S&P 500 Index - Net Profit Margin 1/1/1999 - 8/31/2020 Treasury Yield Curve as of 8/31/2020 Source: Thomson One Source: U.S. Department of Treasury 8/31/2020 12/31/2019 13.5 4.5% Neutral - showed another month 12.5 4.0% Positive - yields up across entire curve of improvement 3.5% with further steepening between 2- and 10-year 11.5 3.0% 2.5% 10.5 2.0% 9.5 1.5% Annual Annual Interest Rate 1.0% 8.5 0.5% % Net Profit Margin Profit Net% 7.5 0.0% 6.5 Maturity The S&P 500 is an unmanaged index commonly used to measure and report performance of the stock market. Indices are unmanaged; direct investment is not an option. Past performance is not an indication of future results. The Treasury Yield Curve relates the yield on a security to its time to maturity is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations obtained by the Federal Reserve Bank of New York. .
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