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July Economic Update

Market Summary

Stock prices climbed higher in June, as investors looked beyond an increase in COVID-19 cases as well as reports that several states planned to slow the pace of their economic re-opening. Stocks opened the month higher, but the momentum quickly stalled, as states struggled to re-open their economies while facing an increase in COVID-19 cases. The Dow Jones Industrial Average gained 1.69%, while the Standard & Poor’s 500 Index tacked on 1.84%. The Nasdaq Composite, already up 6.75% in May, rose another 5.99%. (1)

New Developments

Reactions to news headlines caused some choppy price action last month. Investor sentiment was dampened by a subdued forecast of economic recovery issued by the Federal Reserve and an increase in COVID-19 cases in Florida, Texas, and California, which prompted some states to roll back their re-opening plans. Upside momentum was driven by a series of news announcements.

The Federal Reserve stated it would extend its bond-buying program to include the debt of individual companies. Strong retail sales report sparked hope that the worst is behind us, albeit the numbers were still well below the pre-COVID-19 levels. And finally, news of an effective COVID-19 treatment for critically ill patients helped to contribute to last month’s equity gains.

Economic Indicators

Assessing the economy has become increasingly difficult due to the uncertainties caused by the pandemic. For example, May’s employment report from the Bureau of Labor Statistics showed that the economy added 2.5 million new jobs. Wall Street economists were stunned by the news, having forecast a drop of 8.3 million. Much like the retail sales numbers reported last month, the employment report was a positive short-term indication of a recovery underway, yet unemployment numbers remain near record highs. (\2)

Many economists and analysts have turned to more creative ways to gauge “real-time” economic activity. In an effort to expand their toolset beyond traditional government reporting, forecasters are now mining a robust vein of real-time data, such as satellite imaging, to count cars parked at retail locations. They also are looking at data, generated by Google and Apple, to determine traffic, pedestrian volumes, and the number of people taking public transportation. Restaurant apps are getting used too. They can help show whether people are returning to social settings.