At the close on Friday, major U.S. stock indices were lower. The S&P 500 finished down 2.3 percent for the week, the Dow dropped 1.8%, and the Nasdaq gave back 3.3%. The market may be uncomfortably volatile until election results have been tabulated, which may take some time.
“A scorching stock market rally that pushed the benchmark S&P 500 to its best August in more than 30 years is entering what is historically the most volatile two-month stretch of the year, increasing the likelihood of market turbulence in the final stretch before the U.S. presidential election.”
Here’s what happened last week:
- Vaccine optimism tempered.S. stock markets responded positively to President Trump’s suggestion that a vaccine will be available by November. However, statements from scientists at the Department of Health and Human Services, the National Institute of Allergy and Infectious Diseases, and other groups indicated there currently is no way to know whether vaccine trial results will be finalized by then, much less whether vaccines will be available.
- Employment moved in the right direction. The United States economy added 1.4 million jobs in August. That was a slowdown from July’s 1.7 million jobs, but it reflected analysts’ estimates, which ranged from down 100,000 to up 2.1 million. The range tells you there is a lot of uncertainty about current economic conditions. The unemployment rate was 8.4% for August.
- Government help wanted. In July, there were fewer furloughs, terminations, and wage and hour reductions at small businesses. However, 50% of small businesses reported they will be closing within six months unless they receive additional assistance from the government. That could really hurt the economy. Small businesses employed almost 60 million people in 2019. That’s about half of U.S. workers.
- Small business layoffs could become permanent. Rehiring peaked in May 2020, possibly because of PPP loan distribution. In mid-August data scientists at Gusto reported, “…if an employee was terminated in the midst of the strictest lockdowns in March and April and hasn’t been hired back already, they probably will not be rehired by that employer.”
- A pat on the back for the Federal Reserve. The August 2020 NABE Economic Policy Survey found that more than 75% of its participating members believed the current stance of U.S. monetary policy was appropriate. That’s the largest percent since 2007. When it comes to economic recovery, 49% don’t expect it to happen before the second quarter of 2022.
- Make sure you know the time period. Spoiler Alert: Third quarter economic data will look really good, as long as it’s compared to second quarter data. When economic data for the third quarter of 2020 is announced, make sure you know the time frame being reported. Quarter-to-quarter data will probably look fabulous. Year-to-year data may provide a better understanding of where the country is in our economic recovery.
- How are the Great Recession and the Covid-19 Recession different? The Covid-19 recession was preceded by an economic shock that produced higher unemployment than we saw during the entire Great Recession. Today, four times as many people are receiving government unemployment insurance.
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