After witnessing a volatile first half of the year due to the pandemic-led concerns, the S&P 500 has recorded its best August in the past 36 years, soaring about 7%. Of the 11 S&P 500 sectors, nine witnessed growth.
Major technology companies’ resilience to the coronavirus crisis heavily supported the market’s momentum. Rising work-from-home and online shopping trends along with increasing digital payments helped major tech stocks gain on the surging demand for their products and services.
Credit for this rally can also be given to the several COVID-19 vaccine-related developments during the month, which aided Healthcare stocks. Further, the reopening of the economy benefitted the coronavirus outbreak-hit sectors like airlines, retailers, hotels and restaurants, and cruise line operators to some extent.
Notably, a slew of positive economic data helped instill optimism in investors. Per a report by the Commerce Department, consumer spending in the United States grew 1.9% in July, which countered expectations of a slowdown in the economy.
Also, the housing sector seems to be a bright spot in the U.S. economy amid the coronavirus crisis as sales of existing homes in July witnessed the strongest monthly rise in the survey’s history since 1968.
The stocks climbed in the month-end on Federal Reserve’s decision to support the economy by keeping interest rates lower and targeting an inflation rate of 2%, averaged out over time. This means that in order to support the fall in the unemployment rate, the central bank will tolerate a rise in price levels.
Finance Sector’s Contribution to the Rally
Financials’ independently rallied more than 4% during the month. Impressive earnings reports from the sector participants encouraged investors to invest in finance stocks.
Also, capital markets’ activities continued to show strength and thus supporting investment banks despite muted M&As. Further, low interest rates might have maintained the demand for bond issuances. Strong equity markets are likely to have kept trading desks busy, thereby, aiding asset managers and brokers.
The individual credit card default reports released by card issuers in mid-August showed signs of improvement in July 2020 despite the coronavirus outbreak-led economic slowdown. This is expected to have further uplifted investors’ sentiments.
Moreover, with the Fed’s announcement regarding inflation, bank stocks witnessed a boost, as investors were optimistic about the rising 10-year Treasury yield.
4 Stocks That Outpaced S&P 500
The stock registered growth of 9.4% in August, thus, supporting the S&P 500 index’s rally.
Shares of Synchrony gained 9.2% in August.
Last month, SVB Financial stock recorded a solid gain of 12.2%.