August has been a good month for stock investors. At the end of last week, the S&P 500 Index was up 6.8 percent for the month. The Index is poised to deliver its best returns for the month since 1986, when it gained 7.1 percent, reported Financial Times.
The performance of U.S. stock markets is remarkable, in part, because, so far, company earnings – the profit that publicly-traded companies earn and report each quarter – haven’t been great in 2020. Earnings were down 31.9 percent during the second quarter of the year, reported FactSet. The decline in earnings reflected the impact of coronavirus closures.
Weak second quarter earnings had little impact on U.S. stocks, however. Instead, investors appeared to focus on ‘upside earnings surprises.’ That term is used to describe companies with earnings that exceed analysts’ expectations. During the second quarter, 84 percent of companies in the S&P 500 beat analysts’ estimates.
FactSet reported other factors have been cited to explain the upward trajectory of stock markets, as well. These include:
- Improved earnings sentiment
- Expectations for additional fiscal stimulus
- Optimism about coronavirus treatments and vaccines
- Fear-of-missing-out (FOMO) as the market moves higher
The list should also include the Federal Reserve’s strategy for inflation and employment, which was announced last week. Randall Forsyth of Barron’s reported:
“In practical terms, the central bank’s current policy of near-zero interest rates and heavy purchases of Treasury and agency mortgage-backed securities will continue as long as unemployment remains elevated. The chasm between a Wall Street at record levels and a Main Street in a near-depression will persist as a result.”
Last week, the Standard & Poor’s 500 and Nasdaq Composite Indices chalked up a fifth consecutive week of gains, while the Dow Jones Industrial Index moved into positive territory for 2020.
Could You Pass The American Citizenship Test?
It’s not easy to become an American citizen. In fact, newly minted citizens may know more about the history of the United States than many of us who were born here. In 2018, a national survey reported just one-in-three Americans scored 60 percent or better on a multiple-choice test that included questions from the U.S. Citizenship Test.
See what you know about the United States by taking this brief quiz:
- What does the Constitution do?
- Defines the government
- Sets up the government
- Protects basic rights of Americans
- All of the above
- Name one of the two longest rivers in the United States.
- Mississippi River
- Colorado River
- Ohio River
- Rio Grande River
- What did Susan B. Anthony do?
- Founded the Red Cross
- Made the first flag of the United States
- Fought for women’s rights
- Was the first woman elected to the House of Representatives
- Which statement correctly describes the “rule of law?”
- The law is what the president says it is
- The people who enforce the laws do not have to follow them
- Judges can rewrite laws they disagree with
- No one is above the law
- When was the Constitution written?
- Name your U.S. Representative.
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Weekly Focus – Think About It
“When humor goes, there goes civilization.”
--Erma Bombeck, Humorist, writer, columnist
Andrew Zittell is a Registered Representative with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Strategic Wealth Advisors Group, LLC a Registered Investment Advisor. Yerba Buena Financial Partners and Strategic Wealth Advisors Group, LLC are separate entities from LPL Financial.
https://insight.factset.com (or go to
https://www.barrons.com/articles/the-fed-unveils-its-everything-old-is-new-again-monetary-policy-51598638387 (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/08-31-20_Barrons-The_Feds_New_Policy_Means_Rates_will_Stay_Lower_Longer-Footnote_5.pdf)