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Stocks React to Jobs Report – July 27, 2020

The Week on Wall Street

Stocks slipped in the final days of trading last week on higher jobless claims and rising tensions in the U.S.-China relationship.

The Dow Jones Industrial Average lost 0.76%, while the Standard & Poor’s 500 dipped 0.28%. The Nasdaq Composite Index dropped 1.33% for the week. The MSCI EAFE Index, which tracks developed stock markets overseas, rose 1.24%.1The Wall Street Journal, July 24, 2020,2The Wall Street Journal, July 24, 2020,3The Wall Street Journal, July 24, 2020

Stocks Lose Momentum

Stocks marched higher to begin the week on progress with a COVID-19 vaccine and a string of upbeat corporate quarterly reports. Firming oil prices and the passage of a fiscal stimulus bill by the European Union also helped buoy investors’ spirits.

Market sentiment, however, turned negative after Thursday morning’s report of an uptick in new unemployment claims, which suggested a possible slowdown in hiring. The market was led lower by the technology sector ahead of quarterly reports from some of the sector’s biggest names.4NYTimes.com, July 23, 2020

U.S.-China Tensions Escalate 

Tensions escalated last week as the U.S. ordered China to close its consulate in Houston, which the White House claimed was stealing American information. A day earlier, the U.S. had accused China of attempting to steal COVID-19 research data. China responded by ordering the U.S. to close its consulate in the city of Chengdu.5CBSnews.com, July 22, 2020,6APNews.com, July 24, 2020

The markets appear more focused on the apparent deteriorating relations between the two nations, worried about a repeat of the trade battle in 2018. Whether the rancor is managed is likely to remain a top concern for investors in the weeks ahead.

Final Thoughts

The mega-cap technology companies’ market dominance is a concern to some. Last week it was reported that six of these mega-cap stocks represent 41% of the Nasdaq market capitalization. Five mega-cap names included in the S&P 500 Index account for 22% of that index’s market capitalization.7CNBC, July 22, 2020

Investors have embraced these firms because they appear to be able to show solid financial performance in the midst of an economy coping with COVID-19.

Robert Roman
CEO, Managing Director
MGO | Wealth Advisors

THE WEEK AHEAD:
KEY ECONOMIC DATA

Monday: Durable Goods Orders.
Wednesday: Federal Open Market Committee (FOMC) Meeting Announcement. 
Thursday: Gross Domestic Product (GDP), Jobless Claims.  
Friday: Consumer Sentiment.

Source: Econoday, July 24, 2020
The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. 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 WEEK AHEAD: COMPANIES REPORTING EARNINGS

Tuesday: Advanced Micro Devices (AMD), Visa (V), Pfizer (PFE), McDonalds (MCD), 3M Company (MMM), eBay (EBAY), D.R. Horton (DHI).
Wednesday: Facebook (FB), Boeing (BA), Qualcomm (QCOM), PayPal (PYPL), General Motors (GM), Shopify (SHOP), Teladoc Health (TDOC).
Thursday: Apple (AAPL), Ford (F), Alphabet (GOOGL), Mastercard (MA), Procter & Gamble (PG), Eli Lilly (LLY), United Parcel Service (UPS).
Friday: AbbVie (ABBV), Exxon Mobil (XOM), Caterpillar (CAT), Merck (MRK), Chevron (CVX).

Source: Zacks, July 24, 2020
Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. 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.

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“Never tell people how to do things. Tell them what to do and they will surprise you with their ingenuity.”
–  George S. Patton

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How Are Bonds Taxed?

Bonds are sometimes used as an investment vehicle, but as with any investment, there are tax considerations as well. The interest you receive from corporate bonds may be taxable, which means that those taxes impact a portion of your earnings. In addition, savings bonds and government-issued Treasury bonds may be exempt from state and local taxes, but they may be taxable on the federal level. On the other hand, municipal bonds may be tax-exempt on the federal level, but they may be taxed at the state and local level.

With this being said, it’s always important to understand the tax implications of your investments. After all, it’s not about what you make – it’s about what you make after taxes!

* 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.gov8IRS.gov, July 23, 2020

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3 Tips for Choosing the Perfect Golf Ball

There have been countless advances in the science of crafting the perfect golf club, but golf balls have been getting a lot of love lately too. Today, you can find golf balls on the market that promise everything from a lower score to a better swing. But how do you find the perfect golf ball for you? Here are some tips:

  • Assess your game and choose a ball accordingly. If you regularly come up 10 to 15 yards short, you might want a ball that’s designed for additional distance. If you’re hitting the greens, but the ball isn’t sticking, look for a ball with more spin.
  • Choose a ball based on your skill level. High-handicap players might need a ball for distance or control, while low-handicap players might want to focus on a ball that helps them improve their short game.
  • Pick a ball with an appropriate construction type. Three-piece balls are designed for more backspin, while multilayer balls are targeted at reducing the effects of spin on the ball.

The golf ball world is always changing, so keep on the lookout for your new favorite ball!

Tip adapted from GolfWeek.com9GolfWeek.com, July 24, 2020

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Slow Stitching: Your New Favorite Hobby

    Many people have heard about the therapeutic benefits of knitting, crocheting, and even embroidering. But there’s a new hobby in town: slow stitching!

    Slow stitching, also known as slow sewing, consists of layering unique fabrics on top of a quilted piece, and then, hand-sewing them into a design. The beauty of slow sewing is in its simplicity. There is no right or wrong way to do it. As long as you’re using a little creativity, you’re sure to enjoy yourself.

    Another beautiful thing about slow sewing is that it often uses reclaimed fabrics. You can use anything from old lace from a dress you were going to throw away to scraps of fabric from a tailor in your neighborhood. It’s a great way to give these usually discarded scraps a new life!

    Tip adapted from PetalPlum.com10PetalPlum.com.au, July 24, 2020

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    Start Your Own Little Free Library

    Starting a free library in your community is a great way to reuse old books that you might normally toss out. Give your novels a second chance at life and pick up a new read for yourself with a little free library!

    Setting up a little free library and saving countless books from the landfill is easy. Here are some tips:

    • Identify a location that you can legally install a library. The best areas have a lot of foot traffic and are pretty visible.
    • Buy or make your own library! The library should be a small box where people can put books. The books should be protected from the elements.
    • Build support for your little free library! Contact local news outlets, tell friends and family members, or stand outside with your library to share the good news. You could even have a grand opening ceremony for your little free library!

    Tip adapted from LittleFreeLibrary.org11LittleFreeLibrary.org, July 24, 2020

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    Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.

    Diversification does not guarantee profit nor is it guaranteed to protect assets.

    International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

    The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange and the NASDAQ. The DJIA was invented by Charles Dow back in 1896.

    The Nasdaq Composite is an index of the common stocks and similar securities listed on the NASDAQ stock market and is considered a broad indicator of the performance of stocks of technology companies and growth companies.

    The MSCI EAFE Index was created by Morgan Stanley Capital International (MSCI) that serves as a benchmark of the performance in major international equity markets as represented by 21 major MSCI indices from Europe, Australia and Southeast Asia.

    The S&P U.S. Investment Grade Corporate Bond Index contains U.S.- and foreign-issued investment-grade corporate bonds denominated in U.S. dollars.

    The SPUSCIG launched on April 09, 2013. All information for an index prior to its Launch Date is back-tested, based on the methodology that was in effect on the Launch Date. Back-tested performance, which is hypothetical and not actual performance, is subject to inherent limitations because it reflects application of an Index methodology and selection of index constituents in hindsight. No theoretical approach can take into account all of the factors in the markets in general and the impact of decisions that might have been made during the actual operation of an index. Actual returns may differ from, and be lower than, back-tested returns.

    The S&P/Case-Shiller Home Price Indices are the leading measures of U.S. residential real estate prices, tracking changes in the value of residential real estate. The index is made up of measures of real estate prices in 20 cities and weighted to produce the index.

    The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.

    Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

    Past performance does not guarantee future results.

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    Consult your financial professional before making any investment decision.

    Fixed income investments are subject to various risks including changes in interest rates, credit quality, inflation risk, market valuations, prepayments, corporate events, tax ramifications and other factors.

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    References   [ + ]

    1, 2, 3. The Wall Street Journal, July 24, 2020
    4. NYTimes.com, July 23, 2020
    5. CBSnews.com, July 22, 2020
    6. APNews.com, July 24, 2020
    7. CNBC, July 22, 2020
    8. IRS.gov, July 23, 2020
    9. GolfWeek.com, July 24, 2020
    10. PetalPlum.com.au, July 24, 2020
    11. LittleFreeLibrary.org, July 24, 2020