Weekly Wrap-Up

Last Week In Markets: Aug 17 - Aug 21 2020

Fisher Investments recaps the biggest market, political and economic news from last week, including US and eurozone Markit Manufacturing and Services Purchasing Manager’s Index (PMI) readings, UK core consumer prices and retail sales figures and Japanese Q2 2020 GDP estimates.

Global equities rose as the US market hit record highs. The S&P 500 price index crossed a new all-time high on Tuesday echoing what the total return index confirmed a week ago: The bear market officially ended on March 23 and a new bull market is underway. While many commentators largely credit government fiscal and monetary responses for this milestone, we believe this misunderstands how markets work. In our view, stocks’ recent rise to record highs reflects their forward-looking nature as they anticipate better-than-expected economic and corporate results in coming years. For more, please see our 8/18/2020 commentary, “Don’t Thank the Fed for Stocks’ All-Time High.”

In the US, the August Markit Flash Services and Manufacturing Purchasing Managers’ Indexes (PMIs) rose to 54.8 and 53.6 respectively—each beating expectations and signaling economic expansion. The Conference Board’s Leading Economic Index rose 1.4% m/m in July, matching estimates. Initial Jobless claims were 1.1 million for the week ending August 15, higher than expected. Despite headlines claiming the contrary, jobs data has little bearing on where stocks go next—unemployment is backward looking while stocks are forward looking. For more, please see our 8/21/2020 commentary, “Jobless Claims’ Uptick Isn’t a Recovery Red Flag.” The Democratic Party held the first ever virtual national convention, during which former Vice President Joe Biden officially accepted the party’s nomination.

In the eurozone, the August Markit Flash Services and Manufacturing PMIs decreased to 50.1 and 51.7 respectively, each missing expectations. July core consumer prices (excluding food and energy) rose 1.2% y/y, in-line with estimates and up slightly from June. In the UK, Markit/CIPS Services and Manufacturing PMIs increased to 60.1 and 55.3, improving from July’s readings. July core consumer prices (energy, food, alcohol and tobacco) rose 1.8% m/m, while retail sales increased 1.4% y/y, outpacing market expectations.

In Japan, the first reading for Q2 2020 GDP showed a significant contraction of 7.8% q/q (27.8% annualized), worse than expected. The August Jibun Bank Flash Services and Manufacturing PMIs came in at 45.0 and 46.6, respectively. While manufacturing data improved from the previous month, services declined slightly. June industrial production rose 1.9% m/m, but fell 18.2% y/y. July core-core consumer prices (excluding food and energy) rose 0.4% y/y, slightly below estimates. July imports and exports tumbled 22.3% y/y and 19.2% y/y, respectively.

The Week Ahead

The US releases the second estimate of Q2 2020 GDP and July durable goods orders. The eurozone releases July money supply data. The Republican National Convention begins on Monday, August 24.

Source for all data cited is FactSet. This update constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice. No assurances are made we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. In addition, no assurances are made regarding the accuracy of any forecast made herein. Global equities are represented by the MSCI World Index. The MSCI World Index measures the performance of selected stocks in 23 developed countries and is presented net of dividend withholding taxes and uses the maximum rate applicable to non-resident institutional investors who do not benefit from double taxation treaties. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets.