• Chris Simpson

“Back To Record Highs For The Stock Market”- Market Update August 6, 2020

The S&P 500 is back to hitting record highs this week which means that it has fully recovered from its coronavirus woes. Since the S&P 500 tracks the stock prices of the 500 largest companies in the U.S., it can serve as a good indicator of how the economy is performing. The index has been quite active this year in particular:

➢ On February 19, the S&P closed at an all-time high. However, just a month later the S&P had fallen over 20% and set several single-day records for the biggest losses.

➢ Since March 23rd, the index has rallied back over 50%, also setting records for the biggest single-day gains. Tuesday's record confirms that a bull market started on March 23rd.

Let’s take a look at some of the biggest business updates from this week.

Home Depot soars on stay-at-home orders

The mandated stay-at-home orders that have been instituted nationwide have been good for the home-improvement king. Since people can no longer spend money at restaurants or the movies, they’re giving a bigger chunk of their wallets to improve their homes.

Additionally, since people have been forced to quarantine, they now have more time to tackle those DIY projects that they haven’t been able to get to.

➢ Home Deport’s revenue grew by 23% to $38 billion, which is extra impressive given that Home Deport is already well past their peak growth period.

Home Depot is definitely performing well now, however, investors aren’t sure if it will last. The stimulus checks and an additional $600 in unemployment aid helped fuel consumer spending but both have stopped and there is no definite next wave of stimulus coming.

Lyft and Uber prepare to shut down California operations

The battle between ridesharing services and the government has been waging for some time. Ridesharing companies insist that their drivers are independent contractors (not employees) so they aren’t entitled to benefits. However, the government insists that ridesharing drivers are employees so they need to receive all the proper benefits.

Recently, a new law passed in California that gave both Uber and Lyft 10 days to reclassify their drivers as employees, and both companies responded by threatening to cancel their operations in that state.

Both Uber and Lyft insist that ⅘ of their drivers actually prefer to be independent contractors because it offers them more flexibility. Not only that but even if they were to institute changes, it’s not something that could be done in 10 days.

This fight is still ongoing.

Chegg profits off online earning

Home Depot isn’t the only company profiting from the changing times. As more and more students are pushed to take their studies online, e-learning company, Chegg, has been right there to help them out.

➢ Sales soared 63% from the same quarter last year and they brought in 153 million in revenue.

➢ New subscribers also jumped 67% and they brought in more subscribers in 3 months than in all of 2018.

Chegg is in a good spot because they own the whole customer value chain (content, transactions, data, and distribution channels) that relate to their service. This direct ownership, combined with the scale of its offerings, is helping it benefit from the e-learning surge.

Chegg's shares are up 100% so far this year.

Ryan Reynolds $610 million dollar payday

The biggest payday of Ryan Reynolds’s career isn’t coming from acting but from the sale of his gin company, Aviation Gin. On Monday, the alcoholic drinks group Diageo announced that they will be purchasing Aviation Gin along with a few other brands in a deal that includes an upfront payment of $335 million. Reynolds is just one of a few celebrities who own their own alcohol brands. Others include:

➢ George Clooney - Casa Migos tequila

➢ Dwayne “The Rock” Johnson - Teremana tequila

➢ Conor McGregor - Proper 12 Whiskey

➢ Matthew McConaughey - Wild Turkey bourbon

That’s it for this week -- Join us next week for another market update.

Securities and investment advisory services offered through NEXT Financial Group Inc. Member FINRA/SIPC. Sierra Ridge Wealth Management is not an affiliate of NEXT Financial Group Inc.

This material is not intended as an offer or solicitation for the purchase or sale of a security or an other financial instrument. Past performance does not guarantee future performance.

All the views expressed are those of Chris Simpson and not those of Sierra Ridge Wealth Management or NEXT Financial Group Inc.

The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.

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