Investment Updates

(Friday, October 16, 2020, 10:00 p.m. EST) With Covid infections worsening and a pivotal national election only 18 days away, it was easy to miss the two good economic surprises this past week.

From the perspective of investors trying to build wealth over the long run, here's what happened.

Business owner optimism increased by +3.8 points in September, according to the National Federation of Independent Business (NFIB).

Business owner sentiment is high versus its historical norm. Small businesses created 60% of all new jobs in the U.S. over the last decade, accounting for half of all employees in the U.S., which makes this a useful forward-looking indicator.

Business owners already had been optimistic in August, which makes the newly-released September surge in optimism a good surprise.

Nine of the 10 subcomponents in NFIB's index of business owner optimism, tracked by the National Federation of Independent Business, moved upward. Twenty-three percent more business owners surveyed in September by NFIB expected to increase employment. Business owners saying they planned to make capital outlays rose by +28%, and +36% more business owners in September said they had jobs openings. Owners are expecting improved business conditions over the next six months increased by 8 points.

Perhaps the more important surprise in economic data this past week was today's report from the U.S. Census Bureau showing that retail sales, excluding gasoline, soared higher by +6.8% in the 12 months ended September 30, 2020.

Excluding gasoline because gas prices are so volatile, retail sales showed surprising strength considering that the Covid recession is barely over.

The Covid recession was the shortest downturn in modern history.

The surprising strength in retail sales is important because it shows consumers kept spending despite the pandemic, and consumer account for 70% of the economy.

The Standard & Poor's 500 stock index closed Friday at 3,483.91, a fractional gain of +0.01% from Thursday and +0.19% from a week ago. While less volatile this past week, the S&P 500 closed Friday higher by +43.57% from its March 23rd Covid bear-market low.

Stock prices have swung wildly since the coronavirus crisis started in March and volatility is to be expected in the months ahead.

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