Today, I'd like to provide an update on the coronavirus, including the economic and market implications. We had good news on the medical front, as the pandemic remains under control. Case growth is down, and the case growth rate remains well below the lows seen in mid-June. Still, testing continues to be an area of weakness, and the possibility that school reopenings will lead to more infections is a concern.

The good news is that the pandemic remains under control, with continued improvement. Case growth has gone down further over the past two weeks, and the case growth rate remains below the lows seen in mid-June. The control measures are working.

After a great month like August, expectations and momentum are high, and you could reasonably expect to see another great month ahead. That scenario happens, and it is certainly what we are seeing in the first days of September. But taking a detailed look at last month’s results suggests some reasons for caution. Let’s start with where the returns came from.

August was a very good month for the markets. The Nasdaq and S&P 500 reached new highs, and investors continued to move back into the markets. We also saw infection numbers decline, and the economic recovery started to regain strength. Consumer confidence looks to have bottomed, and wage growth has ticked up again, supporting spending growth.

There has been a great deal of commentary surrounding the change in how the Fed is going to manage inflation. As announced yesterday, the Fed will be using a “flexible form of average inflation targeting.” This means that rather than the prior objective—to keep inflation below 2 percent at all times—the Fed will now aim for an average inflation level of around 2 percent. Since inflation is well below 2 percent and has been for some time, markets are interpreting this announcement as the Fed will be willing to let inflation run hot (i.e., above 2 percent) for some time to restore the average. Cue the worries about hyperinflation.

Today, I'd like to give an update on the coronavirus, including the effects on the economy and markets. On the pandemic front, we’ve had some good news. Case growth is down significantly, and the case growth rate is below the lows seen in mid-June. Further, outbreaks in most states have been contained, although there are emerging worries in the Midwest. Testing does remain a weak spot, as the number of tests has trended down and the positive rate remains well above what it should be. Nonetheless, the big picture is that, for the moment, the pandemic is under control.

The good news is that the second wave of infections has continued to come under control in the past two weeks. Case growth is down significantly from the peak, and the case growth rate has ticked back down below the lows seen in mid-June. Despite the higher case counts, the pandemic is once more under control. The control measures are working.

Tomorrow, I will give my usual pandemic update (spoiler alert: improvement continues). But today I’d like to focus on what is becoming increasingly clear: the stock market and, to a lesser extent, the economy have started to move past the pandemic. While it clearly isn’t over and will continue to have an effect on both, the headlines and market reactions have moved on.

It’s my first day back from vacation, and I’m thinking I should take time off more often. Not only did we get some great posts here from my colleagues (thank you, all!), but my absence apparently allowed markets to hit new all-time highs. With investors getting excited, many expect the run-up to continue, despite the fact that I am now, metaphorically, back in the office. Sentiment is increasingly positive, and the fear of missing out is becoming a powerful driver for nervous investors to get back in the market. But should they?

Today, I'd like to provide an update on the coronavirus, including the effects on the economy and markets. We had some good news on the pandemic front this week, with the virus now back under control. Nationally, the daily spread rate is down to around 1 percent per day, and the daily number of new cases has held steady at about 55,000. Plus, the data shows that outbreaks are being contained in most states. One area of concern is testing. The number of tests has trended down over the past two weeks, and the positive rate remains well above what it should be.