One of the most highly watched indices of the US stock market, the S&P 500 closed on Tuesday, August 18th, at a record 3,389.78, close to 3 points above its previous high that was set last February 19th.
And the S & P 500 was not alone. The NASDAQ also climbed to a new record, passing its previous June high, while the Dow Jones Industrial Average came within just 5% of its own February peak.
After the pandemic began to negatively affect the US and world economy, the stock market took an unprecedented nosedive, losing about one third of its value. But US stocks have been on the rebound since the US central bank announced a banquet of innovative economic support directives on March 23rd.
One analyst was surprised by the speed and strength of the market’s recovery, especially since the country is still faced with a pandemic that is ravaging many locations across the country, with many businesses closing and enormous numbers of people losing their jobs.
Observers believe the recovery is partly explained by actions taken by the Federal Reserve and other kinds of stimulus plus investors who are sure the economy will eventually get back on track and see the stock market as a good place to make money on that prediction.
Driving the stock market’s positive performance are to a large extent technology stocks. Apple, Microsoft, and Amazon are among those companies that have benefited from lockdowns as people shelter at home and use their devices and internet more than ever. Cloud computing and machine learning companies have also benefited.
“We would not be flirting with all-time highs were it not for technology,” said Terry Sandven, chief equity strategist at US Bank Wealth Management.
Beginning in September 2010 until March 2020 the United States added more than 22 million jobs to the economy. Then came the historic COVID-19 pandemic that wiped almost that entire 10-year gain in a mere 6 weeks. In only a little more than one month the unemployment rate skyrocketed from about 3.5% in February to a high of 14.7% in April. The trend for May has reversed that free-fall, with unemployment dropping to 13.3%, less than many were expecting. The re-opening of the economy, including a return to work of employees to the leisure and hospitality, construction, education, health services, and retail sectors, has lifted the total number of employed during the month of May.
The good news about employment caused a rise in the stock market, with the NASDAQ almost reaching a record high. The S&P went up more than 2% and is now only 1% shy of where it was at the beginning of 2020, and less than 6 percentage points short of where it was in February, before corona burst onto the planet, to devastating effect.
The NASDAQ, which weighs towards hi-tech companies such as Amazon, Apple, and Microsoft, is protected to a certain degree from economic downturns down-turns. The sheer size of these companies is protective, but in addition, lockdowns necessitated by the coronavirus did not affect tech companies as much since workers can more easily pivot to working from home than traditional companies that require a human workforce to interface with consumers. Even more, the dependence consumers had on e-commerce during the lockdown boosted the strength of these types of companies.
During May employers added 2.5 million jobs to the job market, despite the prediction by economists that the government was going to report the loss of 8 million jobs during the month.
The Nasdaq rose to its highest point in eleven years as optimism is mounting that the US economy is well on its way to recovery. The good news that fueled the Nasdaq rally was last month’s surge in the number of people hired, paving the way for what many analysts believe is a clear road to economic stability and growth.
The Nasdaq rose by 1.60 percent, reaching 2,905.34 on an increase of 45.66 points. Standard & Poor’s 500 Index grew to 1,344.66 as it surged by 19.12 points, or 1.44 percent. The Dow Jones industrial average climbed by 153.49 points to 12,858.90, which represents an increase of 1.21 percent.
Improved Economy Brings Higher Car Prices
The National Automobile Dealers Association is predicting that consumers are ready to pay more for new and used cars this coming year as the economy shows definite signs of improvement.
Used Cars in Demand with Low Supply
The NADA forecasts a rise of 6 percent for the average car to $30,000. An even higher price increase of 8 percent is expected for used cars, especially for SUVs and pickup trucks. For small second hand cars the price rise will be significantly lower, climbing by only 1 percent to an average price of $9,475.
More People Ready to Splurge
Luxury cars will most likely be in greater demand than in previous years as the economy keeps pushing forward, allowing people the confidence to splurge on more expensive cars. Used cars are in tight supply now because so few people purchased new cars during the years of the recession.
Paul Taylor, NADA chief economist, believes that US car sales will go up by 9 percent to 13.9 million in the year ahead. Low interest rates and enticing new products will most likely boost sales, according to Taylor.
As January ended yesterday Wall Street celebrated what investors there are saying was their best month since October, 2011. The optimistic attitude was maintained despite the disappointing weaker-than-expected performance which was reported in Tuesday’s economic reports, which surprised investors after a receiving a series of positive data about the economy in recent months.
According to the most recent data available, the Dow Jones Industrial average closed the session at 12,633.89, down 19.83 points or 0.16 percent. The Standard & Poor’s 500 Index was also down by 0.55 points, 0.04 percent to close at 1,312.46. The Nasdaq Composite Index finished up, however, by 1.46 points, or 0.05 percent, at 2,813.40.
The month of January ended up, with the Dow up by 3.4 percent, the S&P 500 up by 4.4 percent, and the Nasdaq finished in the black by a cool 8 percent.