US Equity Markets rallied sharply last week as Fed Chairman Powell announced a change in the framework for Fed policy that effectively signaled rates staying low for quite some time. As a result, the S&P 500 was up 3.3% for the week to a new all-time high, bringing its gains for the year to 8.6%. The Nasdaq rose 3.4% for the week, also to an all-time high, on continued strength in Technology stocks and is now up 30.4% for the year. The Russell 2000 (small-cap stocks) increased 1.7% for the week but remains down 5.4% for the year.
Gains in Global Equity Markets were more subdued than in the US last week, as news of the resignation of Japanese Prime Minister Abe for health reasons impacted markets. Developed Markets rose 1.7% for the week to reduce their losses for the year to down 6.0%. Emerging Markets increased 2.7% for the week on continued declines in the US dollar and are now positive for the year, up 0.6%.
US Interest Rates increased last week following the announcement of a new framework by the Federal Reserve for targeting inflation. Specifically, the Fed will seek to target an average inflation rate of 2.0% instead of the previous policy of an absolute rate of 2.0%. The net effect is that the Fed could choose not to raise rates even if inflation exceeds 2.0% if the average over a period of time remains less than the 2.0% target. Paradoxically, the announcement caused rates to increase, spurred by hopes of increased economic growth in the US. The yield on the US 10-Year Treasury rose to 0.73% from 0.63% the prior week.
Of Interest to Us
US Consumer Confidence dropped significantly in August, hitting its lowest reading since May 2014. At the same time, initial jobless claims remained over 1.0 million, with the latest reading totaling 1.006 million. Data through July remains positive, with Personal Spending up a healthy 1.9%, much better than forecasts. But will the weak Consumer Confidence and jobless claims data for August start to show up in other areas?
for the week ending 8/28/2020
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