Aug. 31 – Sept. 4, 2020

What happened last week

Stock markets see-sawed after capping another strong month

Monday marked the end of August and the close of another positive month for North American equity markets – the fifth consecutive month of positive gains for all four major indexes. September looked to be ready for a hot start, with positive trading sessions on Tuesday and Wednesday. On Thursday, however, all four major North American indexes took a significant hit. The Dow declined 2.8%, the S&P 500 fell 3.5%, the TSX dropped by 1.5% and the Nasdaq fell 5%. In a major reversal of buying and selling, tech stocks – which have led the rally over the last five months – were the biggest drag on markets.

These were the numbers, as of August 31

Canada’s TSX was up 2.14% for the month, regaining 23.44% since the end of March.

The Dow Jones Industrial Average was up 7.57% – its best August performance since 1984 – and 29.72% over the last five months.

The S&P 500 had its best August performance since 1986, gaining 7.01% through the month and 35.43 % over the last five months. It hit record highs on six consecutive days to close out the month.

The Nasdaq continued its strong performance, with a 9.59% monthly increase and a massive 52.93% gain over the last five months. It has already notched 41 record closes in 2020.

Stock splits kicked in for Apple and Tesla

On Monday, Apple Inc.’s 4-to-1 stock split took effect, as did Tesla Inc.’s 5-to-1 split. Since announcing their intentions – on July 30 for Apple and on Aug. 11 for Tesla – stock prices for the tech giants have skyrocketed over 30% and 70%, respectively. Momentum carried into Monday, with a 4% gain for Apple and a 10% gain for Tesla. Both companies stated that the aim of their split was to make shares more affordable for individual investors. It was Tesla’s first stock split, and Apple’s fifth (since going public in 1980). If Apple had never split its stock, its current share prices would be approximately $28,000 each.

Manufacturing activity picked up in Canada and the U.S.

Finding its fastest pace in two years, the IHS Markit Canada Manufacturing Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 55.1 in August – up from 52.9 in July. It’s now at its highest level since October 2018.

In the U.S., the Institute for Supply Management’s PMI exceeded economists’ expectations (i.e., 54.8), climbing to 56.0. This marks the highest level since November 2018 and the third consecutive month of growth. The reading in July was 54.2. For reference, anything above 50 indicates industry expansion.

The Canadian job market grew for the fourth straight month

According to Statistics Canada, 246,000 jobs were added to the Canadian economy in August. A total of 1.9 million jobs have been recovered from the uncertainties of the pandemic lockdown in March and April, when 3 million jobs were lost. The expanding job market pushed the unemployment rate to 10.2%, down from 10.9% in July.

The stock and bond market*
S&P/TSX Composite 16,218.01 -2.92% -4.95%
Dow Jones Industrial Avg. 28,133.31 -1.82% -1.42%
S&P 500 Index 3,426.96 -2.31% 6.07%
NASDAQ Composite 11,313.13 -3.27% 26.09%
S&P Global 1200 Index 2,659.91 -2.14% 1.18%
10-yr GoC Yield 0.54% -0.10% -1.16%
10-yr U.S. Treasury Yield 0.72% -0.02% -1.20%
WTI Crude Oil (US$/bbl) $39.77 -7.45% -34.87%
Canadian Dollar US$0.7656 0.29% -0.55%
Bank of Canada Prime Rate 2.45%

*Weekly performance ending Sept. 4, 2020. Source: Bloomberg.

What’s ahead

Bank of Canada interest-rate announcement: In its last decision, on July 15, the Bank of Canada left its benchmark interest rate unchanged at 0.25% – noting its expectations to keep it there until unemployment falls closer to pre-pandemic levels, and until inflation settles near its 2% target. The next decision is expected tomorrow: Wednesday, Sept. 9.

Circle these dates

  • Sept. 15-16: U.S. Federal Reserve meetings and statement
  • Oct. 12: Canadian markets closed for Thanksgiving holiday
  • Oct. 19: Bank of Canada “business and consumer” survey results released
  • Oct. 28: Bank of Canada interest-rate announcement and monetary policy report
  • Nov. 3: U.S. presidential election

Key take-away

Don’t lose sight of your long-term goals. When markets waver, it’s easy to lose sight of your investment goals. But, history consistently shows that markets recover and trend upwards. Having an investment plan geared towards your individual goals and objectives – and sticking to it – is the best defense against inevitable market downturns.

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