| Friday, August 28, 2020 Headlines 1. Stocks surge even higher, capping off stellar week 2. Is this the GOAT? 3. US sector scorecard since March lows 4. Dow shake-up moves prices Markets Closed
Year-to-Date
 Image courtesy GettyImages/PhotoAlto/Ale Ventura
Markets Today U.S. equity markets surged yet again on Friday, and both the S&P 500 as well as the Nasdaq Composite hit new record closing highs. This story may be getting a bit old by now, but there's no doubting the sheer momentum in the markets at the moment. Despite continued trepidation about a still-battered economy, investors don't seem to be looking back.
Friday's rally caps off a stellar week and month of August (almost), with sharp gains nearly across all major sectors. Tech stocks continued to dominate this past week, as you can see from the chart below, which shows the tech-heavy Nasdaq 100 taking a comfortable lead. QQQ, the Nasdaq 100 ETF, rose 3.77% on the week, with the S&P 500 not too far behind at 3.27%. The Dow Jones Industrial Average, which announced some major component changes this week (more below), surged a respectable 2.64%.
Whether this super-rally continues or falls flat is anyone's guess. But there's still caution out there, if the still-elevated VIX is any indication. Though it has been declining rather steadily of late, the "fear gauge" remains stubbornly above the psychologically important 20 level, which is an unofficial fear threshold. This warrants a degree of caution, especially with markets at such lofty levels.  Chart courtesy TradingView [NEW READER SURVEY: We are running another two-week survey of our U.S.-based readers to gauge your sentiment and see what moves, if any, you have been making with your money given the market recovery and current economic conditions. We'll share the results, as always, and we thank you for your time and participation.]
Headlines:
 Courtesy BofA Global Investment Strategy Is This the GOAT? Could the current rally from the March lows be the Greatest Of All Time, or GOAT, as BofA Global Investment Strategy puts it? According to Bank of America's chart above, if the S&P 500 (SPX) rises above 3,630 (it's currently at 3,508 as of Friday's market close) by the time of the November U.S. elections, this will indeed be the GOAT in terms of both speed and magnitude. To put this into perspective, if the S&P 500 indeed reaches those heights by election day, it will have surpassed the previous GOAT rally off the 1938 lows, which occurred at the tail end of a severe recession during the Great Depression era.
Given how strong the bullish momentum has been in the past few weeks and months, a rise to 3,630 in about two months' time is not unreasonable. That represents only around a 3.5% surge from Friday's close. As noted above, the S&P 500 rose well over 3% just in the past week alone. We'll be keeping an eye out.  Courtesy TradingView U.S. Sector Scorecard Since March Lows Speaking of bullish momentum, let's take a quick look once again at the scorecard for the different equity sectors since the March lows. The numbers are rather astonishing, to say the least. The chart above ranks the 11 State Street SPDR sector ETFs by performance from the late-March pandemic low up to Friday's new record high close.
Clearly, it's been an absolutely stellar five-plus months for all major sectors, even the "losers," as shown by the percentage gains during this time period. The big winner overall, and no big surprise, has been technology. With massive market outperformers like Microsoft (MSFT) and Apple (AAPL) (which split 4-for-1 as of Friday's market close) as its largest holdings, the XLK technology ETF is up a whopping 75% since the March lows. Following closely behind, the consumer discretionary sector is at a 72% gain since March. Again, no surprise here, as the XLY ETF's largest holding, by far, is high-flying Amazon.com (AMZN). Aside from Amazon.com, the ETF holds two other exceptionally strong performers, Home Depot (HD) and McDonald's (MCD), as second and third place holdings, respectively.
Bringing up the rear but still showing very solid returns are the consumer staples and utilities sectors. The XLP consumer staples ETF, up 35% since March, has Procter & Gamble (PG) as its largest holding. PG has been rocketing higher on increased demand for its vast stable of consumer products throughout the pandemic. Aside from PG, XLP also has a large portion of its holdings in Walmart (WMT), PepsiCo (PEP), and Coca-Cola (KO), all of which have very recently made some major upmoves. In last place for the sectors, but still having done respectably, is the utilities sector at 31% since March. Utilities stocks are considered defensive, even safe-haven investments. Since risk appetite has been the rule of late, at least in the current bullish market environment, utilities have understandably taken a back seat in the rally.  Courtesy TradingView Dow Shake-Up Moves Prices As we noted earlier in the week, the Dow Jones Industrial Average is changing. Three of the 30-stock index's long-held components (ExxonMobil (XOM), Pfizer (PFE), and Raytheon Technologies (RTX)) are out, and three new ones (Salesforce (CRM), Amgen (AMGN), and Honeywell (HON)) are in. This change was pivotal in several ways, particularly in the exclusion of energy giant ExxonMobil.
The chart above shows what happened to these individual stocks after the announcement. Salesforce jumped dramatically, though most of that was due to a stellar earnings release. But you can see the general pattern here. The included stocks rose rather sharply within four days while the excluded ones were flat to negative. Whether all of this was due to the Dow's shake-up is questionable, but there's no doubting that getting into the exclusive Dow club may indeed have its benefits. What to Expect Next Week After more record-breaking moves for stocks this past week, the week ahead holds a few uncertainties. Though the economic calendar is relatively light, there are some notable events worth paying attention to. Perhaps foremost of these is the monthly U.S. nonfarm payrolls report on Friday. This will be closely watched for signs of how the employment situation in the U.S. may or may not be progressing. Also watch out for the U.S. ISM non-manufacturing (services) report, which will give a glimpse into a critical sector of the economy. On the individual stock front, both Apple and Tesla stocks will have split at the beginning of the week. Investors are eagerly waiting to see how the stock prices will behave after these splits.
First, here's a look at major asset classes returns year-to-date:  Events This Week
Monday, Aug. 31:
Tuesday, Sept. 1:
Wednesday, Sept. 2:
Thursday, Sept. 3:
Friday, Sept. 4:
U.S. Jobs
Tesla and Apple Split
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(chart courtesy YCHARTS)  Cruise stocks, including Carnival and Norwegian, are up today following promising results regarding VBI Vaccines' two COVID-19 vaccine candidates. Shares of HP are up by over 6% amid the information technology company posting record sales.  E-commerce site eBay's stock price fell the furthest today—down by over 3.5%. Close behind was telecommunications company CenturyLink, which fell by over 3%. Word of the Day Consumer SpendingConsumer spending is the total money spent on final goods and services by individuals and households for personal use and enjoyment in an economy. Contemporary measures of consumer spending include all private purchases of durable goods, nondurable goods, and services. Consumer spending can be regarded as complementary to personal saving, investment spending, and production in an economy.  Photo credit https://www.toyota-global.com/company/history_of_toyota
Today in History Aug. 28, 1937: Risaburo Toyoda and Kiichiro Toyoda established Toyota Motor Co. Ltd., with initial capital of 12 million yen, to design and produce automobiles. The Toyodas, who ran a family-owned producer of spinning and weaving equipment, spent nearly a decade of their "spare time" patiently making prototypes of small, cheap cars in the hopes that they would appeal to Japan's working class. It turns out that they did.
Toyota Motor Corp., Toyota: A History of the First 50 Years (Toyota Motor Corp., Toyota City, Japan, 1988), pp. 36–37, 66–67.
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Friday, August 28, 2020
Measuring Up
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