S&P 500 Breaks New Record; Small Business Picture Is Different
Published Friday, August 21, 2020; 8:00 p.m. EST
(Friday, August 21, 2020; 8:00 p.m. EST) It's a tale of two economies: coronavirus hurts small businesses while the tech giants are immune.
The Standard & Poor's 500 closed at a new record high, but the recovery picture in the overall U.S. economy is not as bright.
The 60 leading economists surveyed in mid-August by "The Wall Street Journal" expect a gradual decline in the unemployment rate to 4.9% by the end of 2023.
However, pre-covid, unemployment dropped to as low as 3.5%, and economists don't expect to re-approach that level, "full employment," for at least several years. To be clear, a complete recovery from the pandemic will take years.
Driven largely by the earnings expected of Facebook, Apple, Amazon, Netflix, Google, and Microsoft, the Standard & Poor's 500 stock index closed Friday at 3,397.16, a new all time high.
While the S&P 500 is full valued relative to its historical norm, it's not trading at anything near an outlandish multiple of expected profits. Valuations on stocks are nothing like the tech-stock bubble in 2000.
Even as the S&P 500 booms, however, the broader economy remains less strong than before the pandemic.
"Despite the recent gains in the (U.S. Leading Economic Indicators) LEI, which remain fairly broad-based, the initial post-pandemic recovery appears to be losing steam," according to economists at The Conference Board, "The LEI suggests that the pace of economic growth will weaken substantially during the final months of 2020."
The Standard & Poor's 500 is one of 10 components of the U.S. Leading Economic Indicators. The LEI is a better way of seeing the expected road to recovery and more accurately reflects what's happening in the real economy.
The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is a market-value weighted index with each stock's weight proportionate to its market value. Index returns do not include fees or expenses. Investing involves risk, including the loss of principal, and past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial or tax situation, or particular needs. Product suitability must be independently determined for each individual investor. Tax advice always depends on your particular personal situation and preferences.
The material represents an assessment of financial, economic and tax law at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
- Despite Pandemic, Stocks Closed 2021 With A 26.9% Return
- Tracking The Economic Boom
- Fed Changes Its Inflation Stance
- Despite Inflation And Omicron, A Booming Economy
- The Week's Financial News: Crosscurrents In The Economy
- After Breaking Records For Six Weeks, Stocks Dropped -2.3% Friday
- Already Higher Than Ever, Leading Economic Index Surged Again In October
- Five Observations For Investment Planning For The Decades Ahead
- Financial Economic Outlook
- S&P 500 Closed Friday At Record High Again On Strong Earnings Reports
- With Economic Recovery Intact, Stocks Are Near Record Again
- Are The Five Stocks Driving The Market's Great Returns Overvalued?