August 4, 2020

Yesterday’s tech-powered rally pushed all three major U.S. equity indices higher, and the S&P 500 to within 3% of its February 19 high.  The Dow and S&P 500 gained 236 and 23 points, or 0.89% and 0.72%, respectively.  The NASDAQ, searching for the 11,000 mark, gained 157 points, or 1.47%.

These gains came after Microsoft and Apple drove the S&P 500 tech sector to an all-time high, increasing 5.6% and 2.5%, respectively.  Tech has by far been the best-performing sector this year, rallying more than 23%.

All futures for the U.S. equity markets are slightly in the red this morning following yesterday’s powerful rally as lawmakers struggle to find agreement on a new coronavirus stimulus package.  House speaker Nancy Pelosi said she, Senate Minority Leader Chuck Schumer and White House Chief of Staff Mark Meadows held “productive” discussions yesterday but added there are several issues still outstanding.  “We are moving down the track,” Pelosi said,” but “still have our differences.”

After four consecutive months of solid gains, some investors are becoming concerned that the markets may be getting ahead of themselves.  The (very near) “V” shaped recent market recovery is reminiscent of the 4th quarter 2018/1st quarter 2019.  While we do not know with any certainty what lies ahead for the markets as the election approaches, we do expect increased volatility.  But remember volatility means upward movements as much as it means downward movements, and the Dow is still about 3,000 points off its mid-February highs.