This Weekly Market Update reviews the top three market headlines; The Federal Reserve Shifts Approach on Inflation, Personal Income and Spending Rose in July, Nasdaq 100 Continues to Soar

Data Points

  • The Fed Announced Major Changes to its Approach on Inflation
  • Consumer Spending and Personal Income Rose 1.9% and 0.4%, respectively, in July
  • Up almost 10% in August, the Nasdaq 100 Index is up 37% for the year and on track for its fifth straight monthly gain

Top Three Market Headlines

The Federal Reserve Shifts Approach on Inflation: Last Thursday, the Federal Reserve announced a major policy shift towards a “flexible form of average inflation targeting”. The Fed stated that if inflation runs below 2% following economic distress, it will seek to hold longer-term inflation expectations steady by seeking periods of inflation above 2% when the economy is stronger. Acknowledging that lower unemployment has not caused inflation in recent years, the Fed will focus its decision-making on shortfalls from maximum employment. They will no longer raise interest rates based on forecasted higher inflation but rather will wait for evidence that inflation has reached the 2% target.

Personal Income and Spending Rose in July: Personal spending rose for the third consecutive month in July due to increased personal income and a recovering labor market. The Bureau of Economic Analysis (BEA) reported last Friday that personal consumption expenditures (PCE), a measure of consumer spending for all goods and services, rose by 1.9% in July from the prior month. Meanwhile, the BEA also reported that total personal income rose by 0.4% in July from June, after two months of declines. Partially offsetting the increases were decreases in government social benefits after the expiration of the $600-a-week federal unemployment benefit. Despite these gains, consumer optimism continues to deteriorate, illustrating the deep uncertainty of U.S. consumer demand driven by the news surrounding the health crisis and the uncertain economic outlook.

Nasdaq 100 Continues to Soar: The tech-heavy Nasdaq 100 Index has followed its impressive 38% rally last year with a gain of 37% so far this year and is on the verge of doubling in 20 months, marking its most powerful run this century. Last Wednesday, the index climbed 2.1% amid a streak in which it has risen in nine of the past eleven trading sessions. Additionally, mega-cap tech firms, including Facebook, Amazon, Apple, Alphabet, and Microsoft, continued their advances and each rose to all-time highs on Wednesday. As media and technology stocks continue to excel in a tech-reliant market, the Nasdaq 100 Index is on track for its fifth straight monthly gain.

 
 
As of August 28, 2020 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 2.74%
 12.02% 5.02% 18.42%
S&P 500 3.29% 13.47% 9.97% 23.86%
Russell 2000 1.69%
 9.69% -4.55% 8.76%
MSCI EAFE 1.69% 7.63% -4.58% 7.39%
MSCI Emerging Markets 2.76% 13.38% 2.28% 18.90%
FTSE NAREIT 2.34% 6.03% -13.80% -10.95%
Bloomberg Commodity 2.35% 12.58% -9.26% -4.33%
Barclays U.S. Aggregate -0.51% 0.44% 6.60% 6.12%

WSJ 8/27/20, BEA 8/28/20, Bloomberg 8/26/20. Data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.