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Mosaic Weekly Article 8/28/20

August 28, 2020

Happy Friday! Summer is quickly coming to an end as the last full week of August brought its fair share of news-worthy headlines. As I write this, the market is looking to wrap up a very strong week with the Dow Index having now erased all of its losses for the year. The S&P 500 has already been on the “plus” side for some time led by the hard-charging technology sector. Let me touch on a few important items of note: The Dow Index (30-stock benchmark) announced on Monday that there would be a shake-up to 3 of the 30 components. Salesforce, Amgen and Honeywell will be added to the Dow Index while Exxon Mobil, Pfizer and Raytheon will be removed. Part of this is being driven by the 4-for-1 stock-split taking place with Apple. Apple had grown to be a large part of the Index and the overall technology weighting. Once the split occurs on Monday, the weighting would have dropped significantly. It is important to keep the weightings of each independent sector intact and Salesforce will help to fill that void. Interestingly, Exxon Mobil had been a Dow component for nearly 100 years. While energy may still “power” the world, things are changing rapidly and some industries are simply better equipped to handle this.


The Federal Reserve Chairman, Jerome Powell, made powerful statements on Thursday morning which made a few things clear. Concerns for a prolonged level of high unemployment, low inflation, and a slow-down in economic recovery exist. In short, low interest rates are going to be here for some time with the Fed positioned to increase monetary “actions” as needed. The target and goals remain in place:  increase inflation to the 2% target, or higher, and lower the unemployment numbers. It will be interesting to see how both of our Presidential candidates respond to these pressures in the coming weeks.


One thing we have taken note of is the increase in the number of Initial Public Offerings (IPOs) coming forward over the last few weeks. With so much cash still sitting on the sidelines, the timing couldn’t be better for many of these companies to take advantage of the conditions that exist right now. Several of the companies coming to market are technology and software focused. Perhaps another sign of the “new economy” that is being created by the Covid Pandemic. We view this as a healthy sign and a welcome change. While the Merger & Acquisition (M&A) activity remains robust in this low interest rate and cheap money environment, seeing new and innovative companies coming into the market is a good thing.


Finally, let’s take a ride on the political train! Thankfully, the pomp and circumstance of the two rival parties is behind us and we can begin to focus on the real issues. At least, let’s hope we can. But let’s be honest, the next few months are going to be a real circus and I think we all know this to be true. The deluge of headlines, rhetoric, posturing, accusations, and all-out nastiness, are only going to increase in the weeks ahead. There is simply no way around this. At this point there is little separation between the two candidates from a polling perspective. What we do know is that we are a country divided on many issues and ideals. In years past, the stock market would tend to show its hand and let us know in which political direction things were leaning based on platforms and ideals, but not so much at this point.  Right now, all we can do is watch and wait. 


Be well and stay safe!

Your local Towson Financial Advisors

S&P 500 Index is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy. You cannot directly invest in the index.