Memorial Day Trading: Normally Uninspired on Days Before Long Weekend In the Stock Trader’s Almanac we show how the market trades around Memorial Day. In the table below we went back to 1971, the year the Uniform Monday Holiday Act took effect, moving Memorial Day and most other federal holidays to Monday. In what used to be the “May/June Disaster area” the S&P was down 15 of 20 Mays from 1965 to 1984. Then May was the best month from 1985 to 1997. In recent years, the Friday before Memorial has become getaway day on The Street and volume is often diminished and trading uninspired. With many areas of the country reopening, this trend is likely to continue. Average performance on each of the three trading days prior to the long weekend is rather lackluster for S&P 500 and NASDAQ. NASDAQ does have a higher frequency of gains during the three days, but average performance is still tepid.
Claims Continue to Fall, Continuing Claims Continue to Rise Thu, May 21, 2020 For the seventh week in a row, jobless claims have been falling coming in at 2.438 million which was above forecasts of 2.4 million. This week's 2.438 million number is the lowest claims data point since the first spike in March. That is certainly a positive as those declines are a sign of improvement, but claims also continue to print at much higher levels than anything observed prior to COVID-19 as the running total since the first print over one million in March now stands at 38.6 million. That is roughly 11.8% of the US population or 23.5% of the labor force. As previously mentioned, this was the seventh consecutive week in which jobless claims declined week over week. As shown in the chart below that is an unprecedented streak. In the data going back to the late 1960s, there have only been two other stretches of seven weeks of declines: one ending in October of 1980 and another ending in November of 2013. Given jobless claims are at such extremely high levels and have very far to fall until they return to normal, this streak certainly could keep growing. As for the non-seasonally adjusted data, this was only the sixth consecutive week with a decline, but this week's 2.174 million number, as with the seasonally adjusted number, is also the lowest print since the first of the extreme readings in March. The four week moving average has also continued to decline consistently falling for a fourth straight week down to 3.042 million. While an improvement, this week's decline of 501K was the smallest week over week decline since the four week moving average began to turn around four weeks ago. Again while initial jobless claims have been improving in recent weeks, a massive number of people in the US remain unemployed. Although lagged one week to initial jobless claims, continuing jobless claims came in at a record 25.073 million this week.
Sectors Moving Towards Overbought Tue, May 26, 2020 The S&P 500 has managed to trade in overbought territory for most of the past week. Looking across the eleven major S&P 500 sectors, six are overbought (over 1 standard deviation above its 50-DMA) at the moment while five are neutral (within 1 standard deviation of its 50-DMA). Industrials, a recent laggard, was the best performing sector last week, gaining 7.2%. That rally led the sector to not only take out its 50-DMA but also move into overbought territory. Financials, Real Estate, and Utilities which have also fallen behind performance-wise recently also managed to finish above their moving averages though they have not reached overbought territory just yet. Regardless, conditions across sectors are broadly overbought at the moment if not approaching overbought.
Typical June Trading: Early Gains Tend to Fade After Mid-Month Over the last twenty-one years, the month of June has been a rather lackluster month for the market. DJIA, S&P 500 and Russell 1000 have all recorded average losses in the month. NASDAQ and Russell 2000 have faired better with modest average gains. Historically the month has opened respectably, advancing on the first and second trading days. From there the market then drifted sideways and lower into or near negative territory depending upon index just ahead of mid-month. Here the market rallied to create a nice mid-month bulge that quickly evaporated and turned into losses. The brisk, post, mid-month drop is typically followed by a month end rally lead by technology and small-cap.
The Losers Wed, May 27, 2020 There's been a number of different stories flowing around this morning regarding the fact that more than 90% of stocks in the S&P 500 are above their 50-day moving averages (DMA) and how that has historically been a bullish indicator for the subsequent performance of the market. Rather than focus on all of those winners, though, we wanted to look at some of the losers, namely, the S&P 500 stocks that are currently below their 50-DMA. The table below lists the 34 S&P 500 stocks that were trading below their 50-DMAs as of this morning. Not only are there a relatively small number of stocks on the list, but seven of them are within 1% of their 50-DMAs and only four are more than 5% below. In other words, if the equity rally continues to have legs, this list could quickly shrink even more. In looking through the names on the list, two notable trends stood out. First, although Energy, Financials, and Industrials are the worst performing sectors so far this year, Cincinnati Financial (CINF) is the only stock on the list from one of those sectors (Financials). Meanwhile, Technology, the top-performing sector in the S&P 500 so far this year, accounts for two of the names on the list (Motorola Solutions - MSI and Citrix Systems - CTXS). The sectors that account for the most names on the list are Consumer Staples (8), Utilities (8), and Health Care (7). A second notable aspect of the names listed pertains to recent performance. In going through the charts of the names listed, you would expect to mostly see charts of bombed-out stocks that were so weak that they couldn't even manage to rally in this environment. While that was the case for many of them, there were also a number of stocks that actually outperformed in the initial stages of the bear market, but have started to fall apart either later in the decline, or in many cases, after the market bottomed. The nine stocks shaded in the table below (charts below) all traded at 52-week highs at least two weeks after the S&P 500 peaked in late February. These are all generally names that investors thought would benefit from the pandemic and a prolonged decline. Now that markets have stabilized, though, and the economy appears to be on the mend, there's been a rotation out of them. One example is Citirix Systems (CTXS). After hitting a 52-week high as recently as May 11th, it now finds itself on the loser list.
Fund Flows Still Show Little Equities Enthusiasm Thu, May 28, 2020 The table below gives a summary of mutual and exchange-traded fund flows as compiled by the Investment Company Institute for the week ending May 20th. Equity fund flows remain negative. While there’s been lots of anecdotal evidence of retail enthusiasm in the equity market, fund flows are a very different story. This week was relatively modest, with equity fund outflows in the bottom 6% of all readings across mutual funds and ETFs. That totals $13.7bn of AUM out the door, with the worst hits coming for global funds which saw flows in the bottom 3% of all readings. The last 3 months and year have been the worst on record for aggregate equity fund flows across mutual funds and ETFs, and the worst three months on record for world equity funds. ETFs tracking equities have not seen large inflows but they are also not suffering the same kind of outflows as mutual funds. Commodity funds and bond funds are a totally different story. The last three months have been the best on record for commodity fund inflows, while bond funds have seen readings in the top 3% of all periods for the last week and month; recent commodity fund flows are slightly cooler than their record pace of the last three months but are very, very strong nonetheless.
Valuations Stretching Tue, Jun 9, 2020 With equities recovering a massive share of the declines from earlier in the year, valuations have gotten a bit elevated. As shown in the chart below, the trailing price to earnings ratio of the S&P 500 is now in the 99th percentile of the past decade. At the moment, the S&P 500's P/E ratio of 22.5 is the highest since January and February of 2018. Prior to that, the last time that the S&P 500 had a P/E around this elevated level was in late 2009 and it was even more elevated in the late 1990s/early 2000s. As for the individual sectors, Technology is also in the 99th percentile of the past decade's range with the only higher readings being in February of this year right around the time of the last all time high for the S&P 500. Consumer Discretionary is trading at even more of a premium. Its 33.4 P/E is at its highest level since September of 2009 after rocketing higher over the past few weeks. As for the other sectors, Communication Services is the only other sector in the 90th percentile or better of the past decade while Health Care, Real Estate, Industrials, and Materials are all in the 75th percentile or higher. Financials and Utilities have more modest valuations on a P/E basis in the 39th and 57th percentiles, respectively. For the sectors like Consumer Discretionary, Communication Services, and Technology as well as the S&P 500 itself, these premiums are similar to earlier this year at the last all time high on 2/19 (second chart below). Back then, all of these sectors were trading in the 99th or 100th percentile of their 10 year range. Utilities was another sector with an elevated valuation, but fast-forwarding to today, its valuation is much more modest. Other sectors like Real Estate and Consumer Staples are similarly at less of a premium than back on 2/19. Additionally, valuations are appearing a bit stretched relative to their 10 year range on a price-to-book basis. In the past ten years, the S&P 500 has only had a higher PB ratio (currently 3.66) earlier this year in January and February. Prior to that you would need to go back to the late 1990s around the dot com bubble to find a higher PB ratio for the index. Meanwhile, the PB ratios of Consumer Discretionary, Health Care, and Technology are at their highest levels of the past 10 years. Energy on the other hand is still at the low end of the past decade's range similar to Materials and to a lesser extent Financials. Back in November of last year through February of this year, the S&P also had its price to book, similar to its price to earnings, at the high end of the past ten years's range. Yesterday marked the first time that the PB ratio was in the 99th percentile of the past ten years without another occurrence in the prior 60 days since November of last year. For the PE ratio it was the first time since February. As shown in the tables below, for the PB ratio that is also only the sixth time that has happened since 2000. Following such occurrences, the S&P 500 has leaned towards weaker than normal performance, especially in the short term (week and month). Although a very small sample size, the same can also be said for the price to earnings ratio.
Decile Analysis of 6/11 Declines Fri, Jun 12, 2020 Yesterday was a flat out terrible day for equities. Breadth was extremely weak as the S&P 1500 had its worst day since March 16th falling over 6%. Most of the individual stocks within the index had fallen by even more with 23% down double digits. As shown below, one of the key driving factors of yesterday's move was performance since the bear market low on March 23rd up through the start of this week. More specifically, the was clear profit-taking of the best-performing stocks of the new bull market. The decile of stocks that had risen the most from the March 23rd low through Monday fell 12.45% on average yesterday. No other decile fell double digits. Meanwhile, the stocks that have lagged on the way up actually outperformed yesterday, though that is not to say they were saved from sharp single-day declines. As shown in the first chart below, performance in the initial rally off the March lows was not a very clear factor in yesterday's selling though the best and worst performers in that period did see outsized declines yesterday. Alternatively, more recent performance was a more pronounced factor yesterday. Beginning in mid-May there began to be some rotation into names that had lagged in the first leg of the bull market rally. Over the past several weeks since then, things have reversed and these have been some of the best-performing stocks. As a result, there was major profit-taking of these recent winners yesterday. The best performing decile from 5/13 through the start of this week averaged a decline of 13.92% yesterday while the worst performers only fell 4.64% on average. Another trend recently that has received a lot of headline attention has been the retail investor's roll in the rally, especially in regards to the run-up in some less attractive and more beaten-down names. Given that lower-priced shares are typically seen as easier to stomach to retail investors, that also seemed to play a role yesterday. Both low market cap and low priced shares faced the worst declines yesterday. Alternatively, high priced and high market cap names saw much smaller declines.
Job Losses Around the Globe Wed, Jun 17, 2020 Every Wednesday we release our Global Macro Dashboard which covers major macroeconomic and stock market indicators across 23 of the world's largest economies. One of the stats tracked is each country's unemployment rate. Labor market data has been a major focus in the US as jobless claims have printed in the millions for multiple months now and the U-3 unemployment rate sits at 13.3%, off its April high of 14.7% but still at some of the highest levels since the Great Depression. High unemployment is not just a US phenomenon though. While it isn't as extreme as the US, the world average across the 23 countries in our Global Macro Dashboard has soared and currently sits at 7.6%; the highest level in a decade. In the charts below, we show eight countries that are experiencing some of the most dramatic upswings in unemployment. Our neighbor to the North, Canada, has a similar unemployment rate to the US both in terms of the rate itself and the sharp upswing over the past few months. Of the other countries in our Global Macro Dashboard, Brazil, South Africa, and Spain are the only other countries with double-digit unemployment rates at the moment. Like Canada and the US, the unemployment rates of Hong Kong, Malaysia, and South Korea have also all spiked to the highest levels of the past decade. Sweden, Australia, Germany, and Switzerland also all have seen large moves higher. Of these, only Germany has seen any respite as the US has in the most recent readings.
Tech Overbought for Over 50% of the New Bull Market Wed, Jun 24, 2020 Most sectors have drifted lower in the past week with defensives like Real Estate and Utilities having taken it on the chin the most down 4% and 3.16%, respectively. The move has brought the Utilities sector back below its 50-day moving average. At the moment, it is the only sector below its 50-DMA. On the other hand, Technology and Communication Services stocks have continued to press higher up 2.35% and 1.05% in the past week respectively. Now the Tech sector is over 10% above its 50-DMA and is easily the most overbought sector. Alongside Tech, Communication Services and Consumer Discretionary are the only other sectors that are currently overbought. Most of the other sectors were overbought within the past week but recent declines have left them in neutral territory. As shown in the trading range charts from our Daily Sector Snapshot below, the majority of sectors have been consistently trading in overbought territory over the past couple of months. Before declines in the past few weeks, some of these had even traded at over 2 standard deviations above their 50-DMAs. With most having since returned to neutral territory, they broadly remain off their highs, though, Consumer Discretionary and Technology are trading around fresh 52 week highs. As previously mentioned, Communication Services, Consumer Discretionary, and Technology are still overbought and that should not come as a surprise. These three sectors have consistently been overbought in the three months since the bear market low on March 23rd as shown in the charts above and below. Since that low, Technology has been overbought more than 50% of trading days and both Communication Services and Consumer Discretionary have been overbought for 47.06% of days. Given these three sectors account for just under half of the weight of the whole S&P 500, the broader index has not been far behind trading overbought for 38% of days since 3/23. Looking at the other end of the spectrum, Consumer Staples has been overbought the least at only 7.35% of days. Other groups that were stronger during the bear market but have since seen performance wane like Health Care and Utilities also have been overbought far less frequently.
Nasdaq 2% Pullbacks From Record Highs Thu, Jun 25, 2020 It's hard to believe that sentiment can change so fast in the market that one day investors and traders are bidding up stocks to record highs, but then the next day sell them so much that it takes the market down over 2%. That's exactly what happened not only in the last two days but also two weeks ago. While the 5% pullback from a record high back on June 10th took the Nasdaq back below its February high, this time around, the Nasdaq has been able to hold above those February highs. In the entire history of the Nasdaq, there have only been 12 prior periods prior to this week where the Nasdaq closed at an all-time high on one day but dropped more than 2% the next day. Those occurrences are highlighted in the table below along with the index's performance over the following week, month, three months, six months, and one year. We have also highlighted in each occurrence that followed a prior one by less than three months in gray. What immediately stands out in the table is how much gray shading there is. In other words, these types of events tend to happen in bunches, and if you count the original occurrence in each of the bunches, the only two occurrences that didn't come within three months of another occurrence (either before or after) were July 1986 and May 2017. In terms of market performance following prior occurrences, the Nasdaq's average and median returns were generally below average, but there is a pretty big caveat. While the average one-year performance was a gain of 1.0% and a decline of 23.6% on a median basis, the six occurrences that occurred between December 1999 and March 2000 all essentially cover the same period (which was very bad) and skew the results. Likewise, the three occurrences in the two-month stretch from late November 1998 through January 1999 where the Nasdaq saw strong gains also involves a degree of double-counting. As a result of these performances at either end of the extreme, it's hard to draw any trends from the prior occurrences except to say that they are typically followed by big moves in either direction. The only time the Nasdaq wasn't either 20% higher or lower one year later was in 1986. Like What you see?
Election Year July Performance Tepid July historically is the best performing month of the third quarter however, the mostly negative results in August and September tend to make the comparison easy. Two “hot” Julys in 2009 and 2010 where DJIA and S&P 500 both gained greater than 6% and a strong performance in 2013 and 2018 have boosted July’s average gains since 1950 to 1.2% and 1.1% respectively. Such strength inevitability stirs talk of a “summer rally”, but beware the hype, as it has historically been the weakest rally of all seasons (page 74, Stock Trader’s Almanac 2020). July begins NASDAQ’s worst four months and is the third weakest performing NASDAQ month since 1971, posting a 0.5% average gain. Dynamic trading often accompanies the first full month of summer as the beginning of the second half of the year brings an inflow of new capital. This creates a bullish beginning, a soft week after options expiration and some strength towards the end. Election year Julys rank in the bottom half of all election year months. DJIA: 0.5%, 6th worst; S&P 0.4% 6th worst; NASDAQ (since 1972): -0.7% 3rd worst; Russell 2000 (since 1980): -0.2% 3rd worst.
Best of July Likely Over NASDAQ’s mid-year rally came to an end on Tuesday, July 14. During the rally’s 12-day stretch beginning on the third to last day of June through the ninth trading day in July, NASDAQ gained 4.7%. This is well above its average performance since 1985 but less than half of its best showing from 1999. At NASDAQ’s high close during the rally on July 10 it was up 6.0%. Historically around this time in July is when the market has begun to weaken as NASDAQ’s full-month average performance is just 0.9% since 1985. In the following chart, July’s seasonal pattern over the last 21 years has been plotted with July 2020, plotted on the right axis for comparison through yesterday’s close. This July’s well above average performance so far called for a second, larger range in order to aid in the comparison. Over the last 21 years the market’s trend has been lower beginning right around mid-month through the close. DJIA, S&P 500, NASDAQ, Russell 1000 & 2000 have on average given back some or all of their first half of July gains.
Bears Still Outweigh Bulls Thu, Jul 23, 2020 Although the S&P 500 is up around 1% over the past week with the index clearing the technical hurdle of the early June highs around 3,230, sentiment has shifted lower. Just last week, AAII's reading on bullish sentiment rose above 30% for the first time in four weeks. That didn't hold as bullish sentiment fell to 26.06% this week. While the percentage of investors reporting as bullish fell, there was only a small increase in the number of investors reporting as pessimistic. 46.83% of respondents reported bearish sentiment; a 1.46 percentage point increase from last week. That is the smallest change on an absolute basis for bearish sentiment since the final week of June while marking the highest level of bearish sentiment since the same week. That means neutral sentiment saw the biggest move of the three as it gained 3.32 percentage points. Now at 27.11%, neutral sentiment is making its way back up to its recent highs above 30%, though it is still in the bottom 18% of all readings since the beginning of the survey in 1987. Although there were no major shifts in sentiment readings this week, there was one significant development. Tipping back below -20 this week, every week since the last week of February has seen a negative bull-bear spread(a higher share of survey respondents report as bearish than bullish). At 22 consecutive weeks long, that ties another streak that came to an end in the final week of 1990 for the longest stretch on record in which bears have outweighed bulls. While it is too small of a sample size to put much weight on it, the S&P 500 was higher by 14% six months out from the end of that last streak.
That’s Not A Bubble, This Is A Bubble “That’s not a knife … that’s a knife!” Paul Hogan in Crocodile Dundee There is growing talk that growth stocks and specifically technology stocks are in a bubble. But as Paul Hogan showed is in the classic 1986 film, not everything is what it seems, and there is always something bigger and more dangerous. Yes, there are a few of the large technology and communications stocks dominating the gains, but those companies are also dominating earnings growth, as the COVID-19 pandemic has only intensified their overall leadership. In this, the 300-year anniversary of the South Sea Company bubble, it’s important to remember what a real bubble looks like. Back then, King George I, the poet Alexander Pope, and Sir Isaac Newton all got caught up in the massive speculation and took huge losses. Sir Isaac Newton even cashed out gigantic profits, watched the stock of the South Sea Company double in a few weeks, saw his friends get rich, panic-bought back in at twice what he sold for—and then the bubble burst and he lost nearly 80%. Bubbles happen, and they can get even the smartest people in the world caught up in them. But the good news is we don’t see a bubble in growth stocks here; in fact, it is far from it. “The idea that growth stocks are in a bubble has picked up significantly lately,” explained LPL Chief Market Strategist Ryan Detrick. “But what might surprise many investors is that when you compare growth stocks versus value stocks, they are just now above levels from two decades ago, so they likely aren’t actually anywhere near a bubble.” As shown in the LPL Chart of the Day, growth has had a tremendous run, no doubt; but longer-term, when compared with value, growth is actually just now above levels from 20 years ago. This suggests growth could be due for a well-deserved break, but it likely isn’t in the massive bubble that many claim. We continue to like growth for the rest of 2020 and would use any weakness to add to longer-term holdings.
Consumer Confidence Experiences a Setback Tue, Jul 28, 2020 As Covid case counts were rising in the South and Southwest earlier this month, Consumer Confidence took a hit in July as the Conference Board's Index of Consumer Confidence dropped from 98.3 down to 92.6, which was below the consensus forecast of 95.0. While many economic indicators have seen significant bouncebacks in recent weeks, Consumer Confidence hasn't been one of them. However, if the recent declines in case counts among many of the problem states continue to recede that could provide a boost to sentiment in August. Underneath the surface, this month's report was mixed. While the Expectations component dipped along with the headline inline, the reading on current conditions saw a modest increase. Due to the diverging paths of the Expectations and Present Situations indices, the spread between the two actually moved back into positive territory. This is notable in that normally once the spread turns meaningfully negative, it takes months for it to bounce back to positive levels. The last item we wanted to highlight is the index of Jobs Plentiful. In July this reading bounced to 21.3 from 20.5. Two things to note with this index concern the recent low reading and the current level. Regarding the recent trough of 16.5, if that low holds, it would be the highest trough for the indicator during and coming out of a recession since the mid-1960s. In terms of the current level, we would note that back in the early 2000s we saw a similar bounce before the index started to roll over again. Based on July's pullback in the overall headline reading, a rollover in this index next month (like the one in 2002) wouldn't be a welcome development.
High-Frequency Data Reflects Pause in Recovery After carving out the first part of a “V-shaped” recovery, the US economy has leveled off somewhat in response to the latest wave of COVID-19 infections. In this week’s Weekly Market Commentary: Stalling Economic Recovery May Slow Stock Market Rally, we highlighted some evidence of a pause, mostly around mobility. We also cited the recent drop in seated diners from OpenTable and the leveling off of map requests for driving directions reported by Apple Maps, and several other data points. “Most of the real-time data we follow reflects a pause in the recovery following the latest COVID-19 outbreak,” explained LPL Financial Equity Strategist Jeffrey Buchbinder. “We expect the stock market to follow the economic data and take a breather after a 45% rally in just four months.” Several other high-frequency data points point to a pause in the recovery, including a few related to mobility and the pace of business reopenings. Air travel has edged lower in recent weeks amid renewed health restrictions and increasing concerns about COVID-19 outbreaks. Use of public transportation has tailed off recently in some of the most populated cities in the country, reflecting business closures and increasing health concerns. Google’s announcement Monday that its employees would work from home until summer 2021 suggests this measure of economic activity may flatline for a while. Electricity demand has fallen from its recent peak in mid-June, though the latest weekly data point rose slightly. Still, this is consistent with other data suggesting a slowdown in the rate at which businesses are reopening. Some more traditional data points also tell the same story. First, the latest COVID-19 wave has flattened consumer confidence’s recovery trajectory based on Bloomberg’s weekly measure. Today we get the monthly consumer confidence reading from the Conference Board, which is expected to drop 3–4 points from the prior month. Weekly jobless claims rose for the first time in 16 weeks to over 1.4 million for the period ending July 18 and remain well above the pre-pandemic record high of around 700,000. Same-store sales at retailers have hardly made up any ground over the past couple of months. Finally, the New York Federal Reserve’s Weekly Economic Index has shown signs of rolling over in the latest reported week, which could indicate that the third quarter rebound in gross domestic product (GDP) that we expect may not be quite as sharp as many economists expect. The latest reading at -7, which implies an approximately 7% year-over-year decline in GDP, highlights how much ground the economy still has left to make up. Given recent developments on COVID-19, including some renewed restrictions on public gatherings, it is not particularly surprising that some of these high-frequency data points have pointed to a pause. We knew the first leg of the recovery, like turning the lights on, was going to be the easy part. The key question now is how long it will take for these indicators to resume their climbs. More progress containing the virus in the latest hotspots in the South and West is probably necessary, though we are encouraged by falling daily infection rates in such places as Alabama, Arizona, Florida, and Texas.
Bears Double Bulls Again Thu, Jul 30, 2020 The S&P is flat over the past week and is roughly 1.3% away from last Wednesday's high. Even though there has not been any significant push lower, sentiment has taken a hit as AAII's reading on bullish sentiment has fallen down to 20.23%. That is a 5.83% drop from last week (the largest since a 9.91 percentage point decline on June 18th) and marginally surpasses the recent low last October of 20.31% to mark the lowest reading for bullish sentiment since May of 2016. Think about that. Investors in this survey are less bullish now than they were at any point throughout the COVID crisis Meanwhile, bearish sentiment rose to 48.47%. Unlike bullish sentiment, that does not surpass any earlier readings for a multiyear high as it is the highest level since only the end of June. But it is also now only 3.6 percentage points away from the March 26th high when more than half of investors were reporting as bearish. As we discussed in greater detail in today's Chart of the Day, bears more than double bulls as the bull-bear spread is now at its widest level in favor of bears since the first week of May. Back then it was only slightly wider at 28.99. While not at a new low, the bull-bear spread has been negative for a record 23 week-long streak. Not all the losses to bulls this week went to bears as neutral sentiment rose to 31.3%. That is the highest since the start of the month.
August Job’s Report Day - Bearish History July’s employment situation report, typically released on the first Friday of August, has largely been a market disappointment over the last nineteen years. DJIA, S&P 500, NASDAQ, Russell 1000 and Russell 2000 have all declined a majority of the time. Average, historical performance on the day has been negative with Russell 2000 declining the most, off 0.57%. Nearly across-the-board strength in five of the last eight years has improved average performance as the prior eleven-year stretch was nearly all bearish. Yesterday’s ADP private sector employment report showed just 167k jobs were added in July. This was nowhere near the 1 million expected. ADP also revised its June total sharply higher than their initial estimate. The ADP report has not been as reliable over the past few months as their numbers have differed widely from the official government numbers. But ADP’s number is somewhat consistent with the trend in weekly claims data and suggests Friday’s official BLS (Bureau of Labor Statistics) release could be softer than expected as well. Current estimates for the BLS report are looking for around 1.5 million jobs being added in July. Friday’s report may have little impact on the market, just as this week’s ADP report miss had no measurable effect. The Fed has pledged to do everything in its power to support the economy on multiple occasions and another round of stimulus from the Federal government is all but guaranteed as we head toward election day. The timing and magnitude of federal stimulus may still be up in the air, but more is on its way.
