A summary of financial and economic news from last week
The tech-heavy Nasdaq Composite moved higher last week, while the Standard & Poor’s 500 index and Dow Jones Industrial Average moved lower.
“Worries over rising coronavirus cases and waning hopes of more fiscal stimulus have led to a spike in market volatility in the past few weeks, and analysts expect trading to remain choppy in the run-up to the Nov. 3 presidential election.”
Here’s what’s been happening:
- Americans’ net worth increased during the second quarter. How can wealth increase during a pandemic lockdown? Cast your eyes toward the stock market. During the second quarter, the net worth households and non-profit organizations in the United States grew primarily because of share price increases.
- Stimulus expectations shifted sharply. Optimistic projections for economic recovery often include assumptions of additional fiscal stimulus. Congress has yet to agree on new stimulus measures and the likelihood of a new stimulus bill passing may be greatly reduced by the fight over Judge Amy Coney Barrett’s nomination to the Supreme Court.
- CEOs say more stimulus is needed. “The outlook of Business Roundtable CEOs has improved, due in part to actions taken by policymakers earlier this year to help Americans…But further major support from the federal government is necessary to prevent economic recovery from being derailed. Failure to act, along with the lack of comprehensive and coordinated efforts to stop the spread of COVID-19, would impose long term damage on the U.S. economy, hurting most the workers and small businesses least able to absorb the blow.”
- Company leaders also indicate pandemic issues make earnings uncertain. Publicly-traded companies typically offer earnings guidance each quarter. Guidance is a heads-up for analysts and investors about whether a company’s leaders expect it to be profitable in the coming quarter. So far, just 67 companies in the S&P 500 Index have issued earning guidance for the third quarter. That’s about 36% lower than usual. Companies say uncertainty around the pandemic makes it difficult to know what will happen.
- Will we see another government shutdown? The House of Representatives passed a stopgap spending bill last week. The legislation is now on its way to the Senate. If the Senate passes the bill, then our government will be funded through December 11, 2020.
- Hard Brexit consequences. Britain technically left the European Union at the end of last year without a new trade deal. The Brexit transition period provided an additional twelve months to reach a deal. It looks as though no deal is going to happen. As a result, large banks have begun moving staff and assets out of the United Kingdom “…to make sure they can service clients given the prospect that U.K.-based firms…won’t retain passporting rights in a trade deal.”
- Commercial property values drop. The trend toward remote work has a side effect. The value of commercial real estate, especially hotels and retail space, has declined significantly. When commercial property owners have difficulty paying mortgages, new appraisals are required. Current data shows the value of troubled properties has declined by 27%, on average.
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Chart source: https://www.federalreserve.gov/releases/z1/dataviz/z1/changes_in_net_worth/chart/utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosmarkets&stream=business