I saw an interesting chart in the Wall Street Journal last week. It was interesting in that, as the market has strongly rebounded from the route in March, Investors have been pouring record sums into money-market accounts. These “cash-like” mutual funds typically keep their Net Asset Value at $1.00 and can pay slightly better than a bank savings account.
Investors are obviously concerned with the once-in-a-lifetime event of the pandemic. The chart to the left from the Wall Street Journal, shows how dramatic the cash flow into money market accounts has been. U.S. assets swelled recently to $4.6 trillion, the highest level on record since 1992 when tracking of assets began.
Assets in money-market funds aren’t the only way to see how worried investors are, bank deposits are also at an all-time high. Some of the increase is the result of U.S. taxpayers stashing stimulus checks into their bank accounts for emergencies. The record sums in cash are causing analysts to shake their heads trying to figure out what this might mean for U.S. equity markets.
Investors could be right that the recent market advances were too strong and too fast considering all the uncertainty that still prevails. Confirming this, recent data from Deutsche Bank shows overall stock positions for individual investors remains at one of the lowest levels in the last decade. Their view is also shared by many traders who point to the 3.9% one-day pullback a couple of weeks ago. They stress the market is acting like the virus will go away and the global economy will start firing on all cylinders very soon.
How all of this plays out is anyone’s guess. But you can be sure we will keep you up to date with the latest information here.
The Markets and Economy
- Auto makers are struggling with another issue to recoup production lost from the pandemic, absent workers. As factories test more, they are and finding an increase in flu-like symptoms. Workers are being sent home and production schedules shifted to accommodate. Auto manufacturers are also turning to temporary help to deal with the issue.
- The travel industry is concerned corporate executives are happy with the cost savings and productivity increases due to the reduction in business travel. While some business dealings need that face-to-face interaction, executives are finding that video conferencing can yield the same results with less cost and free up workers for more on-line meetings.
- Ad spending in the U.S. is projected to plunge 13% in 2020. Advertising is often one of the first things cut by companies looking to trim spending in times of economic uncertainty.
- Monday’s stock rally was due in part to the Fed announcing it would expand its bond-buying program to include debt from individual companies. While the comments reflect statements already made by the central bank, investors, nonetheless, took the news as a strong positive for equity markets.
- Target Corp. plans to raise its starting wage to $15 an hour next month. This will make the retailers temporary increase during the coronavirus permanent.
- The hotel industry was hardest hit by the pandemic in New York City. The loss of business and international travel will take a toll on the Big Apple. It is estimated that as many as 25,000 rooms, or 20% of the city’s inventory will never reopen. That’s the equivalent to the total market for Louisville, KY or Jacksonville, FL.
- Retail sales shot up an amazing 17.7% in May. This was the largest increase in sales going back to 1992 when the data started being tracked. This increase also came on the heels of the largest monthly drop on record in April. Consumer spending still has a long way to go before we get back to where we were, but it’s a positive step.
- U.S. corporations brought home $124 billion in foreign profits in 2020’s first quarter. That was the highest level since an immediate rush after the 2017 tax law according to the Commerce Department.
- Oil prices rose last week as traders believe cuts from oil producers will help adjust the inventory surplus. Demand is also picking up as prices closed slightly below $40 a barrel on Friday.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
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