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Major Markets Climbed in August

The Best August Since 1984

Major US stock markets were mixed on Monday, but that didn’t stop the Dow Jones Industrial Average and S&P 500 from registering their best August performance since 1984 and 1986, respectively. After suffering historic losses in February and March due to the onset of COVID-19, the broad-based S&P 500 index rebounded in April, climbing roughly 13% that month. It’s climbed every month since then, reaching a new record high last week.

The gains have been driven by multiple factors, including accommodative fiscal and monetary policy, hopes for a coronavirus vaccine or treatment, concentration in mega cap technology shares, and the entry of individual investors into the stock market. Along the way there have been ups and downs. Escalating US-China tensions, increasing coronavirus cases, and disappointing economic data have dampened investor sentiment, but on the whole, US stocks have staged a remarkable comeback from their lows three months into the year.

Index Shifts and Stock Splits

As for yesterday, there were notable shifts and reshaping among both indexes and individual stocks. The Dow, for example, began the week with three new constituents. Salesforce (CRM), Amgen (AMGN), and Honeywell (HON) replaced ExxonMobil (XOM), Pfizer (PFE), and Raytheon Technologies (RTX) in the 30 stock index after Apple’s (AAPL) four-for-one stock split, which also went live yesterday.

The iPhone maker will now have a much smaller influence on the blue-chip benchmark. Apple’s shares climbed 3.4% after the split took effect on Monday. Speaking of stock splits, Tesla’s (TSLA) five-for-one split also took place, sending shares of the electric vehicle maker higher by 12.6%

Investors Gear Up for a Busy Fall

Heading into the fall, similar headlines could propel markets higher. If coronavirus cases level off or there are upbeat developments on the COVID-19 treatment and vaccine front, markets may react positively. At the same time, investors are also buckling up for a bumpy ride as the United States inches closer to the presidential election. Traders are mainly concerned about market volatility if the results are disputed by either candidate or political party. A further deterioration in the relationship between the US and China could also increase investor anxiety.

For example, China announced new technology restrictions related to artificial intelligence over the weekend, which sent shares of Microsoft (MSFT), Oracle (ORCL), and Walmart (WMT) lower yesterday since all three companies have been eyeing an acquisition of parts of TikTok, the wildly popular Chinese video app. More broadly, lawmakers are scheduled to return to work after their August recess. If White House officials and Democratic Congressional leaders can’t reach a deal on another stimulus bill, markets may react negatively.

According to data going back to 1950, September is typically the worst month for the S&P 500. On average, the index loses 0.5% in September. With that said, past performance is never indicative of future results. One thing is for sure—it’s gearing up to be an eventful autumn.

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