August 3-7, 2020

What happened last week

Stock markets rose alongside strong oil and gold prices

Across parts of the U.S., COVID-19 hot spots continued to flare and threaten the reopening of the world’s largest economy; investor sentiment was lifted, however, with news that the infection rate was slowing, nationally, and with reports of further progress towards a vaccine. Markets also reacted positively to better-than-expected corporate-earnings reports in Canada and the U.S., and signs that further government spending will be coming to support economic recovery on both sides of the border.

North America’s major stock exchanges made gains throughout the week, with the tech-heavy Nasdaq continuing to lead the way.

Canada’s TSX, with its significant weighting towards energy, benefitted from a mid-week rise in global oil prices – following reports that inventory levels in the U.S. had fallen significantly. The U.S. benchmark crude, West Texas Intermediate, closed out Wednesday’s trading session at a five-month high.

The spot price of gold reached an all-time high on Thursday, as investors continued to move towards the precious metal (and away from the U.S. dollar) as a haven from market risk.

Governments focused on fiscal stimulus measures

Chasing a self-imposed Friday deadline, U.S. lawmakers continued to debate a pending, additional large-scale economic stimulus package; but, on Thursday, President Donald Trump’s chief of staff noted that the White House and Congress remain “trillions of dollars apart” regarding the size and scope of new stimulus measures. The heart of the debate was around extending a recently expired jobless benefits program, which was rolled out during the pandemic, to provide an extra $600 a week to people claiming state unemployment benefits. Democrats demanded that it be restored as part of the broader economic stimulus package. While the two sides remained distant as of early Friday, negotiations were expected to continue throughout the day.

In Canada, following weeks of negotiation between levels of government, the federal government announced that it’s moving ahead with plans to help provinces and territories make schools and hospitals more pandemic resistant, and to expand outdoor public spaces. More than $3.3 billion – of the $33 billion that the government previously agreed to match for provincial and territorial projects – will be made available on an accelerated basis for pandemic-related projects that can ramp up quickly.

Employment data reflected the economic toll of the pandemic

Released on Thursday, a Department of Labor report underscored the need for additional federal aid in the U.S.: though the number of Americans filing initial claims for jobless benefits fell by 249,000 during the week ending July 31, a total of 31.3 million people were receiving unemployment cheques as of mid-July. On Friday, a separate report (for the month of July) indicated that job growth slowed during the month, with the U.S. economy adding 1.76 million jobs – after adding 4.79 million in June. The unemployment rate fell from 11.1% to 10.2%.

This side of the border, Statistics Canada reported that 418,500 jobs were added in July, bringing the total jobs recovered to more than 1.6 million over the past three months – or just over half of the 3 million lost in March and April. The unemployment rate fell from 12.9% to 10.9%.

The stock and bond market*
S&P/TSX Composite 16,544.47 2.32% -3.04%
Dow Jones Industrial Avg. 27,433.48 3.80% -3.87%
S&P 500 Index 3,351.28 2.45% 3.73%
NASDAQ Composite 11,010.98 2.47% 22.72%
10-yr GoC Yield 0.48% 0.02% -1.22%
10-yr U.S. Treasury Yield 0.57% 0.02% -1.35%
WTI Crude Oil (US$/bbl) 41.22 2.36% -32.65%
Canadian Dollar US$0.7476 0.21% -2.90%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending August 7, 2020. Source: Bloomberg.

What’s ahead

Economic reports: Markets will likely react to various reports that will be released this week covering employment, housing, oil supply, inflation, trade, manufacturing and retail sales, as investors gain deeper insight into the state of economic recovery in Canada and the U.S.

Circle these dates

  • Sept. 9: Bank of Canada interest-rate announcement
  • Sept. 15-16: U.S. Federal Reserve meetings and statement
  • Nov. 3: U.S. presidential election

Key take-away

Don’t let emotions control your investments. Staying focused on a plan that’s geared toward your goals and risk tolerance can be essential to your long-term investing success.

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