The Weekly Update – Financial and economic news for the week ending 8/28/2020

U.S. stock markets moved higher last week. The Dow Jones Industrial Average pushed into positive territory for the year. Other major U.S. indices also finished the week with gains.

“The S&P 500, which closed above 3,500 on Friday for the first time, is about to close the books on its best August since the 1980s and embark on the historically challenging month of September.”

CNBC, August 31, 2020

 Here’s what happened last week:

  1. The Dow Jones Industrial Average got a makeover. The Dow is comprised of 30 companies in diverse industries. On Tuesday, the Dow replaced three companies to “diversify the index by removing overlap between companies of similar scope and adding new types of businesses that better reflect the American economy.” More than $28 billion in passively-managed funds are linked to the Dow.

S&P Dow Jones Indices, August 24, 2020

Bloomberg Green, August 24, 2020

  1. Dow change: Diversity or performance? Some pundits speculated the change in the Dow was less about diversity and more about performance. “The changes seem more reflective of a desire for better-performing stocks than more accurate representation of a changing U.S. economy — the Dow will actually have a lower percentage of tech after the additions… Over the last five years, the Nasdaq has produced almost double the Dow’s gain (151% vs. 78%) and over the last year it has returned nearly five times what the Dow has (47% vs. 10%), per FactSet.”

Axios News, August 25, 2020 

  1. Inflation re-interpreted. When labor markets are strong, wages often rise, and so does inflation. To prevent inflation from rising too high, the Federal Reserve raises rates. It’s an action that tends to slow economic recovery before a full recovery is realized in low-wealth communities. Last week, the Fed announced it will keep rates lower longer so more people will benefit from periods of economic growth. The Fed will focus on maximizing employment levels and maintaining average inflation of two percent.

Board of Governors of the federal Reserve, August 27, 2020 

  1. Consumer expectations sagged. The Conference Board Consumer Confidence Index® declined for the second month in a row. The Present Situation Index dropped sharply from 95.9 to 84.2. The Expectations Index, which tracks short-term prospects for income, business, and labor markets also dropped from 88.9 to 85.2.

The Conference Board, August 2020 Consumer Confidence Survey, August 25, 2020 

  1. Commercial real estate risk and opportunity. U.S. office vacancies are expected to increase through 2021, according to a forecast from Moody’s Analytics. That’s good for companies that rent office space and bad for investors who own office properties.

Moody’s, August 17, 2020 

  1. Social justice now. Professional sports leagues suspended play last week after athletes staged walkouts to protest the shooting of Jacob Blake, a Black man who is now partly paralyzed, by a White police officer in Kenosha, Wisconsin. Milwaukee Bucks players released a statement that said, “Despite the overwhelming plea for change, there has been no action, so our focus today cannot be on basketball.”

ESPN, August 26, 2020 

  1. Report from the office…errr, the living room. Workers may not be commuting, but that doesn’t mean the workday has gotten shorter. The average workday is 48.5 minutes longer than it was pre-Covid, according to a new analysis. The number of meetings is up by almost 13%, although meetings tend to be about 20% shorter (12 minutes).

NBER Working Paper, July 2020

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