Sizzle or Fizzle?
What will August bring?
2020 is more than half over. During the past several months, COVID-19 has evolved from an obscure virus isolated in China to a pandemic that has brought countries to their knees.
Stocks catapulted on the initial shocks of the pandemic, sending major indices into bear territory. But equities have been steadily climbing, and the S&P 500 closed July at 3,271, approaching its pre-pandemic high of 3,386, reached on Feb. 19.
S&P 500 Closing Prices
Markets have continued their forward march despite negative news, including record unemployment. June’s unemployment rate was over 11%, and weekly numbers for July 25 showed an increase of 12,000 from the prior week. The federal government’s extended unemployment benefits has expired and officials in Washington have yet to agree on a a new plan.
However, even news that the economy contracted 32.9% was not enough to dissuade the equity bulls, as every sector except energy posted gains for the month. The S&P 500 rose 5.5% in July.
Earnings Season
The earnings season for Q2 is more than half over and it was no surprise that the big tech companies reported revenue that surpassed the same period last year. Second-quarter profits for Google (NASDAQ: GOOGL), Apple (NASDAQ: AAPL), Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT) surpassed $33 billion.
The New ‘Emperors’
During the last week of July, the CEOs of Apple, Amazon, Google, and Facebook were grilled via video before a Senate panel and referred to as “the emperors of the online economy.” Issues included antitrust matters, censorship, privacy concerns, and competitiveness. Facing additional scrutiny, will these giants continue to rule?
Many competitors were optimistic about the hearings, with Luther Lowe, senior vice president, public policy at Yelp (NYSE: YELP), calling it “a seismic event.” Yelp’s website and mobile app publish crowdsourced reviews, and the company has been in discord with Google’s competition practices for over a decade.
What areas stand to benefit as the world continues to live with the pandemic?
The unknowns of the coronavirus have translated into a continued work-from-home setting for many Americans. Even as companies prepare to open up offices, many employees will continue to telecommute. In a Gartner survey of business leaders conducted in early June, 82% said they planned to allow employees to work from home some of the time, and 47% would allow remote work all of the time.
With this shift, companies big and small need to reevaluate their plans, with security and privacy issues are at the forefront. Firms that offer cloud security, cybersecurity, as well as secure messaging and video conferencing, stand to continue to benefit from telecommuting. And while large office buildings remain relatively empty, the need for smaller, sharable office spaces may see an uptick.
Typically, August is when parents are preparing to send their children back to school. This year will be different.
In fact, several large school districts across the country have already stated they will not have in-person instruction for the fall. Many other districts, including New York City, the country’s largest, are still debating the number of days students will physically attend classes, or whether they will go back at all.
One thing is for sure—back to school won’t be like last year or any other year. Many parents, frustrated with remote learning have been looking at alternatives, such as forming cooperatives and teaching in pods, or utilizing online services.
A current Facebook group discussing learning pods currently has over 33,000 members, with 10,000 added in the last 30 days. Teachers who are reluctant to teach large classes may be more comfortable teaching a smaller group of students. Will this method of alternative learning catch on?
The pandemic brought about great opportunities for big tech companies. What other opportunities will avail themselves in the second half, as the world tries to move on within the confines of a global pandemic?
Over the past decade, August has been the worst month for stock markets. And with the U.S. election on the horizon, what else could 2020 have in store for investors?
Markets are in constant flux, and the only thing certain is continued uncertainty. To learn more, visit quantumeconomics.io. This information is for educational purposes only and should not be construed as trading advice. Past performance is not an indication of future results.
