The chairman’s comments were positive for stocks this morning. He offered to make the Fed’s inflation target of 2% a moving average instead of just a single point. That has an advantage for markets, insofar as, if the Fed is using an average, it means it’s willing to allow inflation to temporarily overshoot that 2% mark on a rolling average basis, which means that the markets don’t have to worry so much about when the Fed might start raising interest rates. What that means for the economy and the market is that you’re going to have lower rates for longer, which means that there’s going to be cheaper money available to start businesses and add jobs and increase earnings, and the stock market likes that prospect.

There’s been a number of factors, so, I mean, if you look at since the March 23rd bottom, the S&P is back up about 55% from the trough lows. But interestingly, that only puts it up about 4.5% year to date, so since the beginning of this year, the Nasdaq is, of course, doing much better. It’s up about 24% year to date. There’s a whole number of factors to your good question about what’s driving it to a new high. So first and foremost, central bank support and increased liquidity continues to be a big driver. That liquidity is pushing a lot of asset prices higher, not just in the stock market, but in the bond market and in hard asset prices, think like commodities, gold, silver, copper, aluminum, those types of things. You also, of course, have pretty massive fiscal stimulus by any measure that Congress has been able to put forward through the pandemic. So that’s been helpful. There’s recently quite a bit of discussion and optimism, frankly, about a vaccine for COVID-19 that could come as early as potentially this year. If you listen to the scientific community, it will take longer to probably get it fully integrated into society. But vaccine optimism is also pushing the markets higher. And it’s important to note, too, that we’ve seen some recent improvement in some of the coronavirus cases. So hospitalizations, ICUs, and just overall case load. So while there’s still challenging pockets around the country, some of that is helping markets move higher. And the last point I would make here is the concentration of the index is also pushing the market higher. So if you look at, for example, the top five stocks, which are all technology stocks, they’re up 72% from the bottom. That compares to 55% for the indices. And that compares to the average stock if you took the average stock in the S&P 500 is still actually down 7%. So tech has been a big driver across the board. And the last point, I guess, I would make is bullish sentiment has continued to be strong. We just saw Investor Intelligence come out with the latest reading this week. We’re almost back to pre-January numbers. The index was at 59.2. In January we were at 59.4. So that bullish sentiment is driving prices higher. It is noteworthy to say, though, history teaches us, sentiment indicators above a 55% number often warrant some caution. So when bullish sentiment grows too strong, oftentimes that’s a contrarian indicator, looking backward. So above 55, which we’re at 59.2, sometimes can warrant a little more caution by investors because sentiment has turned in fact too bullish.

Oh, that could be a long list. There’s quite a few that are doing quite well for a number of reasons, or some would even argue surprisingly well, and there’s others that are really continuing to struggle. Under the, you know, what’s doing really well, I would say probably three or four sectors probably jumped to mind for me. One, we continue to see e-commerce retailers doing really well. Online booking, online activity, purchasing, whether that’s something as simple as groceries and common food staples out to just online shopping, is booming across the board. In many cases, that was a trend that had started long ago, but the pandemic accelerated it. And now everyone is somewhat kind of forced to use it or has been forced to use it so their comfort level is increased, and it’s really showing up in the numbers. Anybody who has a robust e-commerce retailing platform is really benefiting from what’s happening here as we go. Second, I would highlight across the board, we talked about it in an earlier question, is the technology sector. So as more people work from home, you’ve got an increased need for 5G or growth bandwidth requirements to support all of that. You have virtual meetings. You have now as we start the fall school season for K through 12 and colleges and universities, a big need for online education services and power. So technology across the board continues to do really well. The third area I would highlight is housing and home improvement. So you can imagine as interest rates have come down and mortgage rates are setting new all-time lows, housing activity, I think to the surprise of many, has actually been very robust. And there’s a kind of a mini housing boom happening either on the refinance or the new permits and purchases. We’re seeing some movement from urban core out to suburbias. People actually want more space and the ability to get outside and perhaps get away from some of the urban core COVID infection rates. There has been limited housing supply built over the last decade and we’re finally seeing the millennials start to kick in and buy homes, which has been a trend oft-predicted, but really hasn’t come to fruition yet. And then, as I mentioned at the onset, home improvement projects, right? As people spend more time at home, home improvement companies are benefiting quite substantially from the activity that’s happening. Just quickly, the last sector or industry I’d highlight too is health care. So in the near term, we had some delay in health care spending as corporate America wasn’t spending as much money on it as people were working from home. And a lot of elective surgeries and everything got put on hold, creating probably some pent up demand here into the second half of this year or next year. But certainly spending around preparedness, PPE supplies, increased hospitalizations, a lot of research and development going into developing vaccines for COVID-19 is increasing spending, and helps continues to do well. And then just, of course, the age demographics getting older are driving a robust higher spent in education. So health care continues to do well. So e-commerce, retailers, technology, housing and home improvement, health cares are all doing really well through the latest several months.

We refer to that as breadth. In other words, if the market is rising and many, many stocks are participating, we might think that the tide, so to speak, the economic tide, is lifting all of the boats together. That’s generally taken as a positive thing. But if only a few of the stocks are lifting the broad-based indices like the S&P 500, that’s taken as a more concerning sign because not all the stocks, not all the companies, not the entire economy are participating. In this case, that is a little bit of a worry in the short term, because we do think we’re approaching a period in the autumn when there will be more turbulence — turbulence around the elections, turbulence around any sort of increase in coronavirus as we get closer to the autumn and the cooler weather. So that turbulence in a narrowly led market could produce some volatility in stock prices, and some of the stocks that have done really well lately, mainly the technology stocks, could experience the bulk of that turbulence. But we want investors to focus a little bit beyond the next few weeks or few months into the next 12 to 18 months and beyond. And what we see is that the sectors that we like the best, those that are leading the market right now, as a matter of fact, information technology, consumer discretionary, communications services, those sectors that are heavily tech-oriented, for the longer term, we think, will be the sectors that will lead the market, and we do think that the rest of the market will start to move more in the direction of technology. So for people with long-term investment goals, this turbulence might be something to ride out and maybe an opportunity to take some cash and put into these sectors that we like for the longer run.

Well, lately, the dollar has continued to fall. It had quite a surge in the months of February and March earlier in the year as the pandemic began to roll out. But since that peak, the trade weighted dollar, or U.S. dollar, has fallen about 10% to 11%, which is a pretty substantial move in the U.S. dollar. There’s a number of reasons and factors for it. Often cited are COVID-19 cases seem to be more robust here in the U.S. than they are in many other developed countries. So that puts more uncertainty into the growth path and the reopening path. So that puts pressure downward on the dollar. The U.S. trade gap has widened lately, which puts pressure downward on the dollar. There are other countries that are somewhat reducing their holdings of U.S. treasuries, which also puts downward pressure on the U.S. dollar. There’s some trends suggesting the European Union or the EU is showing a little better fiscal coordination and frankly, a little better growth than where they had been. So that is putting strength in the euro and also is a big weighting for the U.S. dollar index. And then I would say elections also having a near-term impact on the dollar. So as people try to foretell what the election season means in November, if there are concerns about higher corporate taxes, that’s dollar negative. If there are concerns about whichever candidate wins and whose administration comes in, that we have less trade protectionist policies, so think tariffs there. That’s dollar negative. And just overall kind of uncertainty of the candidates and the path of the next four years is creating some downward pressure on the dollar. So there’s been a whole series of factors that have kind of lined up lately in unison in coordination to put downward pressure on the dollar. We don’t think the dollar goes materially lower from here, but we do think the general intermediate trend is still for lower dollar pressure.

It depends a little bit, I guess I would say overall you should always stick to your plan, you know, and make sure that your allocations are tight to where those long-term plans are going to be. You may still actually, notwithstanding a 37% recovery from the trough, you may still be underweight your strategic allocations for equities because the market is still down about 6%, 7% year-to-date so far. So if that’s the case it’s not a bad time to basically dollar-cost-average and rebalance the portfolio back into some of those sectors. We still think there’s opportunity in some of the places we like. So for example, financials just this week finally started to catch a bid. That’s been one of the worst performing sectors. It’s a sector we like on valuation and opportunity, so there’s cheap prices there. Health care and technology we think are long term secular plays, so those will continue to offer opportunity over the coming weeks and months. The one thing I would note for those who are maybe looking at a more short timeframe, I was just looking this morning, so we now have 99% of companies in the S&P 500 trading above their 50-day moving average. So what does that mean? That just means prices have come up really fast and a really long ways in a short duration of time. Generally, when that happens, markets are a little bit overdue for kind of a pause, a slowdown, maybe even a little bit of a retracement or correction. So if your timeframe that you’re looking at is really short, then I think there’s some time here for you to look at a little bit better entry levels than perhaps we’re seeing today as the Dow’s up almost 4% in the past two trading days.

A lot of folks since March have been sitting on a lot of cash, basically because they’re afraid of what the market may do next. The folks who are waiting for another shoe to drop, perhaps, another coronavirus infection wave, COVID infection wave, and so they’re waiting for the market to fall further and put money to work. Some folks pulled out money in August out of the market, excuse me, in March, because they were afraid of what the market might do in the spring and in the summer. And those folks have been waiting to put cash back to work. Our attitude all along has been and remains that cash should be used as a tool. We don’t want to pull cash out of the market just because we expect some turbulence. That’s not a really a good way to try to make money. Historically, trying to time the market hasn’t really worked well for folks. You’re better off being in the market and then using cash as a tool to decide when you’re going to increase or decrease your holdings a little bit. And the way we like to do that is when the market gets toppy, we pull a little bit of cash out of those sectors, especially those sectors that we don’t like that have done some good performance in recent weeks and months. So you pull a little cash out, leave it on the side, and when the market pulls back, then you start putting that cash back to work, especially on somewhat of an incremental basis, a little bit at a time, one quarter at a time, perhaps. And that tends to work better for finding low points for buying and then high points for selling. That’s a good way, we think, to make money. It’s done well historically.

Well, oil prices have settled in at about $43 a barrel. That’s going to keep prices at the gas pump right around where they’ve been, just about $2 or in the neighborhood of $2 a gallon, where they’ve been again for several weeks and months now. We think oil prices are likely to stay stable there. Why? Well, because, candidly, $43 a barrel is about the break-even price for many oil producers. It costs about $43 to pull a barrel of oil out of the ground and get it to market. And that’s about what you’re going to get for it. And so since a lot of these companies have fixed costs like leases and land, rent to pay, it’s profitable for them to pull that money out of the ground, pull that oil out of the ground, excuse me, and collect the money and pay the rents. That keeps them in business, hopefully for a time when oil prices might rise a little bit further. So with oil prices where they are right now, we expect some stability. But if we were to see a lot of producers come back online and start producing, then we might see that glut of oil build up again, in which case oil prices could fall a little bit further. So that’s not imminent, or doesn’t appear to be imminent. But right now, we’re sort of in a stable place, a fixed place where $43, $45 a barrel of oil should last us for a while. That, again, should keep prices at the pump more or less steady.