Just The Numbers - September 2020

We are seeing new highs for both NASDAQ and S&P 500 as U.S. manufacturing expands and construction spending remains strong.

For several months (5) we see positive momentum as of August

As another month comes to an end, investors are relieved that global equity markets continued to advance and recorded a very positive August, pushing two of the major U.S. equity markets to new highs. Recording now shows five straight positive months as:

• +7.6% - The DJIA finished in August
• +7.0%  - The S&P 500 finished August
• +9.7% - NASDAQ finished August

In August, the S&P 500 passed its pre-COVID level. It hit new highs later in the month and the NASDAQ reached new highs:

• The DJIA recorded its best August since 1984
• The S&P 500 recorded its best August since 1986
• NASDAQ recorded its best August since 2000

Over the past 5 months, the S&P 500 is up 35.4% – its best five-month run since October 1938.

Expansion continues in U.S. Manufacturing

Each month, IHS Markit releases the U.S. Manufacturing PMI (PMI). It’s created from responses to questionnaires sent to purchasing managers from over 800 U.S. manufacturers, covering topics like new orders, output, employment, suppliers’ delivery times and stocks of purchases. Since manufacturers still account for 11.4% of total economic output and employ 8.5% of the U.S. workforce, this report is closely watched.

On September 1^st, IHS Markit ran the headlines:

“Fastest manufacturing expansion since January 2019” and then wrote the following:

“August data signaled a solid improvement in operating conditions across the U.S. manufacturing sector, with overall growth accelerating to the strongest since early- 2019.”

Spending in Construction Remains Strong

Construction spending is typically a good indicator of the economy’s momentum because it represents individual, business and government spending combined. Money spent on construction normally comes from a place of financial confidence in order to justify building costs. On September 3^rd, here is what was reported:

• Total construction spending in July 2020 was +0.1% above June’s spending as well as -0.1% below July 2019’s spending
• During the first 7 months of this year, construction spending increased to $792.6 billion, +4.0% above the same period in 2019
• Private construction spending was +0.6%
• Residential construction spending was +2.1%
• Nonresidential construction spending was -1.0%
• Spending on Public construction was -1.3%

Unemployment claims

• Week of July 30th data
  • Initial claims were down last week to 881k from 1mm
  • PUA claims were up to 760k from 608k
  • Continuing claims jumped from 27mm to 29.2mm (biggest concern).

Relative growth

Numbers do appear to be strong, but it must also be considered that any positive numbers are going to look good in comparison to March/ April of this year. Thus, these figures should be considered on a relative basis.

Sources: census.gov; markiteconomics.com