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The RFG Weekly Wealth Report

August 24, 2020
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The Week on Wall Street

Stocks powered to another week of gains as the S&P 500 and Nasdaq Composite set multiple new record highs along the way.

FACT OF THE WEEK

Amelia Earhart made the first solo nonstop flight by a woman across the US, departing from Los Angeles on August 24, 1932, arriving in Newark, New Jersey the following day. Her transcontinental flight established a women's record of 19 hours and 5 minutes and a distance of 3,938 kilometers.

MARKET MINUTE

The Dow Jones Industrial Average was virtually unchanged while the S&P 500 rose by 0.72%. The Nasdaq Composite index added 2.65% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slipped 0.71%.

The S&P 500 Sets Record High

The S&P 500 closed at a record high on Tuesday, erasing the steep losses suffered in February and March. The recovery has been powered by unprecedented monetary accommodation, fiscal stimulus, and investor willingness to look ahead with confidence that global economies will get past the pandemic challenges. Technology stocks continued to lead the market and helped push the NASDAQ Composite to new highs.

Stocks were mixed as the week progressed amid some weak economic news, a message of economic caution from the Fed, and continuing uncertainty over a new fiscal stimulus plan. Technology momentum provided support for the broader market, with a late Friday afternoon rally pushing the S&P 500 and Nasdaq Composite to close out the week at fresh record highs.

Not All Sectors Are Participating

Behind last Tuesday's headline that the S&P 500 had set a new record high lies a story of a deeply bifurcated market.

Despite a new high, more than half the companies in the index were still trading below where they began the year. When dissected on an industry sector basis, the year-to-date performance dispersion was quite broad, with sectors like Technology (+25.53%), Consumer Discretionary (+16.68%), and Communication Services (+12.70%) posting strong performance.

In comparison, Energy (-37.56%) and Financials (-20.08%) remained sharply down. Nearly half (5 out of 11) of the S&P 500 sectors were still in negative territory year-to-date.

FINANCIAL STRATEGY OF THE WEEK

30-year Home Loans Fall to Historic Lows

Lately, it can feel like each day brings a new headline about fluctuating market behavior. But amid the ups and downs of 2020, there may be some potential good news on the horizon.

On July 16, 2020, the interest rate for a 30-year home loan had fallen to 2.98%, while the average interest rate for a 15-year home loan had declined to 2.48%

Good news for homebuyers

Keep in mind that just two summers ago, the average interest rate on a 15-year fixed-rate mortgage hovered around 4%, while the 30-year was in the vicinity of 4.5%. With the average interest rate on these loans at new historic lows, it may be a smart time for first-time buyers to consider making their move.

In other words, it's uncertain how long these historically low rates will last. It's always good to consult with your tax, legal, and accounting professionals before considering any changes to your living situation.

Good news for investors

Believe it or not, hopeful homebuyers are struggling to find the right property: on July 4, 2020, the inventory of existing homes for sale was 31% smaller than it was in 2019. Even with these market conditions, 61% of respondents to a recent survey felt that buying a home in 2020 was a good idea.

This interest in purchasing a new home despite the COVID-19 pandemic may be considered a "coincident indicator" by many. In other words, if consumers feel confident enough to go home shopping, that could indicate slowly returning economic confidence.

Good news for everyone

Real estate plays an integral role in the health of the economy. Even when considering the many advantages of homeownership, it can be easy to forget that it is one of the most significant sources of wealth and savings for many Americans.

Whether or not rates will drop even lower is anyone's guess. Although it may seem unlikely, mortgage issuers are dealing with a level of uncertainty that makes it harder for them to judge risk and assess the long-term value of the loans they originate.

As always, please contact my office with any questions or financial concerns you may have.

Have a great week!