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The Best of What They Said and I Read Week Ending 8/16/2020

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice

  Barron’s – August 14, 2020 – The Bear Market Is Nearing an End.   The Bubble Might Just Be Getting Started. – Ben Levisohn

  • “…The stock market had another good week, with the S&P 500 index finishing up 0.6% to 3372.85; the Dow Jones Industrial Average rising 497.54 points, or 1.8%, to 27,931.02; and the Nasdaq Composite gaining 0.1%. The S&P 500’s gain was good enough for the index to finish the week within 0.4 percentage point of its Feb. 19 record high.  In other words, if you went to sleep on Feb. 19 and woke up on Aug. 14, you would think that nothing had happened.”
  • “Assuming that the S&P 500 does trade at a new high, it would be the fastest recovery from a bear market on record. And it wouldn’t even matter if the S&P 500 took its time—the previous record was 310 trading days from the bear-market low on Feb. 9, 1966, to May 4, 1967.  But what if the market didn’t experience a bear market? By the traditional definition, it obviously was: The S&P 500 dropped 34% from Feb. 19 through March 23, far more than the 20% needed to meet the requirement. But there are other ways to think about whether a drop is really a bear market. For instance, a typical peak-to-peak recovery takes 1,542 trading days, on average, according to Dow Jones Market Data, so the speed of the rebound alone would suggest that something else is going on.”


 The Wall Street Journal – August 9, 2020 – Tech’s Stock Market Takeover Reaches New Heights – Paul Vigna

  • “The stock market is more top heavy than it has been in decades.  The collective market value of the top 10 companies in the S&P 500 has swelled to about $8 trillion as of Friday as investors have piled into big technology stocks including Apple Inc., Microsoft Corp. and Amazon.com Inc.  Together, the 10 biggest firms comprise 29% of the index, according to data through July 31 from S&P Dow Jones Indices. That is the highest percentage in at least 40 years and up from 22.7% at the end of 2019.”
  • “The gains among the top stocks are pushing the S&P 500 and Nasdaq Composite back to record levels. But they are masking the underlying weakness of the broader market where other indexes like the Russell 2000, which tracks small-cap stocks, are still in the red for the year…The S&P 500 is up 3.7% this year and just 1% below its February record, while the tech-laden Nasdaq Composite index is up 23% and has set 32 records in 2020.”
  •  “…Amazon.com has led the way with a 71% advance, followed by Apple, which is up 51%. Microsoft has risen 35%, Facebook Inc. is up 31% and Google parent Alphabet Inc. has climbed 12%.  The five firms together represent about 22.7% of the S&P 500, according to S&P Dow Jones Indices, up from 15% at the end of 2019 and well above the average of 13% from 1980 through 2019.  Some analysts warn the pace of returns among the big tech stocks is likely to diminish as they become more expensive.”


U.S. Global Investors – August 14, 2020 – Frank Holmes

  • “…After being above 1 million for 20 straight weeks, the number of Americans applying for jobless benefits dropped below, suggesting the economic recovery is taking hold…Americans kept shopping in July, with retail sales rising 1.2 percent from June, reflecting a rare bright spot in the battered economy. The jump in sales reported on Friday by the Commerce Department, though smaller than the increases in the previous two months, showed that the bounce back in spending to pre-pandemic levels was not a fluke.  U.S. industrial production increased for a third straight month in July, indicating manufacturing is gradually emerging from a deep demand slump.”
  •  “…Goldman Sachs lifted its 2021 U.S. GDP forecast to 6.2 percent and predicts a COVID-19 vaccine will be 'widely distributed' by mid-2021. The bank now projects the U.S. unemployment rate will decline to 6.5 percent by the end of 2021, down from a previous 7 percent forecast.  The housing market remains one of the bright spots of the economic recovery, fueled by ultra-low borrowing costs. Next Tuesday, housing starts are expected to have continued their rebound in July, and applications to build are forecast to have increased as well.”
  •  “…The best performing commodity for the week was lumber, up 12.11 percent, marking its longest rally in 17 years and setting a new price record. In Calgary, and likely other places in North America, soaring lumber and wood panel prices are adding roughly $8,000 to $10,000 per new home construction. With low interest rates housing demand has been strong, coupled with remodeling projects started with the onset of Covid-19 lockdowns, and supply has been somewhat restrained. Adding to costs are 20 percent tariffs on Canadian lumber imports which the National Association of Homebuilders recently penned a letter to President Trump asking for help on increasing the supply of lumber.”

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