U.S. Economy Gains Momentum

By: Sean Schmid, Chief Operating Officer – Penn Investment Advisors
Weekly Update – June 22, 2020

The Week on Wall Street

Stocks moved higher last week on news of more Federal Reserve market support and diminished concerns that new COVID-19 cases might lead to another economic shutdown.

The Dow Jones Industrial Average rose 1.04%, while the Standard & Poor’s 500 gained 1.86%. The Nasdaq Composite Index jumped 3.73% for the week. The MSCI EAFE Index, which tracks developed overseas stock markets, increased 1.88%.^[1],[2],[3]

Investor Sentiment  

News on Monday that the Fed would be expanding its bond-buying program to include the debt of individual companies sparked a sharp jump in stocks. The momentum gained through the week as investors focused on positive economic signals, especially with retail sales. A midweek report of an effective COVID-19 treatment for critically ill patients boosted investor optimism.

Market sentiment also was helped by talk of more fiscal stimulus and a report that China would be moving ahead with agricultural purchases to comply with phase one of the trade deal, easing concerns over growing friction in the U.S.-China relationship.

Mixed Economic Data 

Last week’s economic data illustrated the uneven nature of the nation’s nascent economic recovery.

Retail sales, which were up by 17.7% in May, reflected a strong, encouraging rebound in the U.S. consumer. Consumer spending was particularly strong in clothing, furniture, sporting goods, and autos.^[4],[5]

But industrial production (up by only 1.4%) and new housing starts (ahead by just 4.3%) showed tepid rebounds, indicating that recovery has yet to reach all corners of the American economy. Jobless claims posted their best number since mid-March (1.5 million), but remained high by historical standards.^[6],[7],[8]

Final Thoughts

Last week saw the flare-up of border tensions in two geopolitical hotspots: North Korea and the disputed border region between China and India. The hope, of course, is that escalation can be avoided through diplomacy, but any heightening in tensions may become a concern for global markets. 

THE WEEK AHEAD –

KEY ECONOMIC DATA:

Monday: Existing Home Sales
Tuesday: New Home Sales
Thursday: Durable Goods Orders, Gross Domestic Product (GDP), Jobless Claims
Friday: Consumer Sentiment

Source: Econoday / Federal Reserve, June 19, 2020.  The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision. The release of data may be delayed without notice for a variety of reasons, including the shutdown of the government agency or change at the private institution that handles the material

THE WEEK AHEAD – COMPANIES REPORTING EARNINGS:

Wednesday: KB Home (KBH)
Thursday: Accenture Plc (ACN), Darden Restaurants (DRI)

Source: Zacks, June 19, 2020, Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Any investment should be consistent with your objectives, time frame and risk tolerance. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Tax Tips

­­Do You Know About “Practice” Rights?

The tax preparer you choose to help you file taxes can have different representation or “practice” rights. These rights may affect how they can represent you before the IRS. As you manage your tax details within your financial life, remember these tips.

How Will You Be Represented?

• Unlimited: This category enables your tax preparer to represent you before the IRS on any tax item. The credentialed tax professional can be an Enrolled Agent, Certified Public Account (CPA), or attorney.

• Limited: This category means that only the person who prepared and signed your tax return can represent you before the IRS. However, they cannot represent you on appeals or collection matters. Your tax preparer can represent you in front of revenue agents, customer service representatives, and similar IRS employees.

As you manage your taxes each year, be sure to familiarize yourself with the tax preparer’s representation rights.

 * This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

 Tip adapted from IRS.gov^[9]

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