October 17, 2020 Weekly Market Update. The major U.S. equity indexes finished up on a choppy trading week with the Nasdaq leading +0.79% followed by the S&P 500 +0.19% and the Dow Jones Industrial +0.07%. Economic data was mixed with surprisingly strong retail sales while the COVID-19 stimulus package came no closer to agreement other than Mnuchin saying he would “give ground” in stimulus talks while Trump says he would raise his offer.” Markets tend to abhor uncertainty and three big concerns are very much in the air: 1) the very much needed stimulus; 2) who will win the election (as past Biden leads are again narrowing in battle ground states); and 3) when the country will have an effective and reliable vaccine (J&J paused its vaccine trial while Elli Lilly paused its antibody trial). But the obvious big focus is the upcoming Presidential election and legal teams on both sides are preparing to legally challenge the election result if it is close. Earnings season began this week and according to FactSet 82% of S&P 500 (“SPX”) companies have beaten revenue estimates for the third quarter (Q3) while 86% of the SPX of beaten the S&P 500 estimates to-date as of Q3. For example, most major banks announcing earnings results which far exceeded estimates. Consumer sentiment ticked upward by +0.8 points to its highest level since March at 81.2 after rising +6.3 points to 80.4 in September.
October 10, 2020 Weekly Market Update. The Nasdaq +4.56% led the major indices for a second straight week while the S&P 500 Index and Dow Jones Industrial posted +3.84% and +3.27%, respectfully; this is their best performance since early July. As we enter the last month of the election, the S&P 500 is just 6.5% from an all-time high while the Nasdaq composite is up some +23% and stands just 8.5% from its most recent all-time high (a positive equity trend remains in place which has boded well for the bulls). The markets continue to show optimism about the prospects for Covid-19 treatments, vaccine testing and ultimately a future vaccine treatment by year-end. For example, "Phase 3" trials are quickly progressing for AstraZeneca, J&J, Moderna & Novavax, among others. On the economic front, continuing unemployment claims fell by 1 million to 10.98 million, less than the consensus of 11.5 million, while September ISM Non-Manufacturing Index unexpectedly rose from 56.9 to 57.8. Also, Treasury Secretary Mnuchin moved upward the stimulus dollar amount to $1.8 trillion on Friday in an effort to keep the Pelosi negotiations on the track for approval before the election. Nonetheless, Biden continues to have a comfortable lead heading into the final election days, and this portends that the market is well aware that whoever wins the election it will be rewarded with stimulus either way. Current economic conditions have been a catalyst for the ballooning money supply with the U.S. government issuance of over $3 trillion in fiscal stimulus while the Fed has also increased the money supply by $3.4 trillion year-to-date.
October 3, 2020 Weekly Market Update. The major U.S. equity indices, despite selling off on Friday, posted gains for the week led by the Dow Jones Industrial +1.87% followed by S&P 500 Index +1.51% and the Nasdaq +1.48%. For our moderate to higher-risk client accounts, we put money to work on Friday when the Nasdaq dropped over -2% on news President Trump contracted covid-19 and was flown into Walter Reed Medical Center. The investment strategy employed was a Nasdaq-100 ETF that is characterized as defined outcome as it offers about +15% tech upside participation with a loss buffer of about -15%. On the economic front, the September jobs report added 661,000 jobs moving the unemployment rate down from 8.4% to 7.9%. However, some major entertainment and travel companies announced new layoffs including Disney's 28,000 permanent theme park layoffs, and American Airlines & United Airlines, furloughing over 32,000 employees. Perhaps this is why the biggest investor focus remains on the status of the next stimulus package where Treasury Secretary Mnuchin and Speaker Pelosi are trying to close the gap between the WH’s $1.6 trillion offer and the House bill of $2.2 trillion (negotiations expected to continue over the weekend).