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3 Things to watch & know

This week’s market performance key indicators to watch from Moneta’s Investments Department.

3 THINGS TO WATCH

Presidential Polls: With both conventions done and the nominees officially selected, we now head into the final two-month stretch of campaigning until the early November election. Odds are still currently favoring Biden to be elected, but Trump has seen a post-convention bump in the polls, which has modestly reduced Biden’s odds of victory. Eleven states are seen as “toss-ups” and will likely become a focus for both candidates. (Source: JPM/Goldman)

Second Coronavirus Relief Bill: Things continue to remain at an impasse as a sharp divide exists between the ultimate cost of such a bill. Negotiations are still occurring, but the odds of a relief bill any time soon appear limited.

Economic Releases This Week: Eyes will be on the Dallas Fed manufacturing, ISM manufacturing, employment and construction spending metrics for the status of the ongoing recovery in economic activity.

3 THINGS TO KNOW

Dow Jones Changes: Exxon, Raytheon and Pfizer are all being removed from the Dow Jones Industrial Average with new additions – Salesforce, Amgen and Honeywell – joining the index on Monday, August 31, 2020. This was driven by Apple’s 4-for-1 stock split, which goes into effect on that same day; this will mean a reduction in the index’s weight in the Information Technology sector. The addition of Salesforce will specifically help partially offset that reduction. (Source: Standard & Poor)

Fed’s Inflation Framework: As noted by the fixed income team last Thursday, Fed Chairman Jerome Powell formally announced changes to the Fed’s approach to inflation. The Fed is now shooting for inflation that averages 2% over time, meaning inflation could moderately “overshoot” 2% at times – especially after periods where it was persistently below 2%. Decisions to raise interest rates in the future will be based on evidence that inflation had hit the target of 2% instead of reliance on forecasting rising inflation, which has been consistently wrong. Demographic changes, technology and globalization have all contributed to keeping inflation lower than one would have assumed. (Source: Fed)

S&P 500: The S&P 500 closed at an all-time high for a sixth consecutive trading session on Friday, while the Nasdaq Composite also reached a record. August has been a strong month with the S&P up a robust 7.2%, led by Apple’s 17.7% rise. The S&P 500 is now up nearly 10% year-to-date as of August 30, 2020, which seems light-years from the pain suffered in March. 

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