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
Here we have picked four S&P 500 index member finance companies that moved up more than 7% in August, attributable to their fundamental developments. These companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Berkshire Hathaway Inc. BRK.B is a conglomerate with more than 90 subsidiaries engaged in businesses ranging from ice-cream to insurance. The company’s strong cash position keeps it well-poised for earnings-accretive buyouts and indicates its financial flexibility. Also, continued insurance business growth fuels increase in float, drive earnings and generates maximum return on equity.
The stock registered growth of 9.4% in August, thus, supporting the S&P 500 index’s rally.
Synchrony Financial SYF is one of the nation’s premier consumer financial services companies, offering a wide range of credit products. Its continuous efforts in forging alliances and making acquisitions are expected to boost business growth, enhance digital capabilities and diversify the business. We remain positive about its steady capital position as well.
Shares of Synchrony gained 9.2% in August.
SVB Financial Group SIVB is a diversified financial services company. The company’s improving loan and deposit balances, global expansion strategy, and the SVB Leerink buyout are expected to be beneficial. Also, a strong balance sheet position and efforts to improve non-interest income are likely to bode well.
Last month, SVB Financial stock recorded a solid gain of 12.2%.
Assurant, Inc. AIZ is a global provider of risk management solutions in the housing and lifestyle markets. The company's focus on specialty property, and casualty and lifestyle protection bode well for growth. It plans to deploy capital mainly to fund business growth and finance other investments, which seems encouraging.
The stock rallied 13.3% in August, easily outperforming the S&P 500’s gain.
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