Weekly Market Commentary
October 19, 2020
It was a turbulent week for investors.
Waves of positive and negative news buffeted financial markets last week:
The financial sector delivered upbeat earnings news
Currently, many financial companies in the Standard & Poor’s 500 Index have reported third quarter earnings and have done better than expected. Despite upbeat earnings, some companies’ shares declined because of uncertainty about the path of economic recovery. If recovery continues, some banks may have excess reserves; however, if recovery falters and a double-dip recession occurs, banks may need to add to reserves, reported Barron’s.
October 12, 2020
Yes. No. Maybe?
Markets were sharply focused on the status of stimulus last week. First, it was on. Then, it was off. Then, it might be on. Then, it was off again. There was a big bill. There was a smaller bill. There were stand-alone options.
‘Maybe’ was enough for investors
Major U.S. stock indices finished the week higher, per Barron’s, and global indices were bullish on Friday because of U.S. stimulus talks, reported Financial Times.
“Markets are dizzy from all the talk on both sides about what they want from a deal but believe that something will inevitably happen anyway…Markets are essentially drunk on massive government spending just as they are inebriated from all the Fed quantitative easing and zero-interest rate policy,” said an advisory group chief investment officer cited by Financial Times.
October 5, 2020
Last week, the third quarter of 2020 came to an end – and the fourth quarter delivered a doozy of an October surprise.
President Trump has the coronavirus
On Friday Americans awoke to the news President Trump had contracted COVID-19. Financial markets responded with relative equanimity. After a brief sell-off on Friday, major U.S. indices finished the week, and the third quarter, higher.
Market enthusiasm cooled in September
U.S. stock markets moved higher in July and August. Then, in early September, investors became skittish and major U.S. indices recorded losses for several weeks. The surge of uncertainty may have resulted from changing vaccine expectations, concerns about earnings, fears of a disputed election, and lack of new stimulus, reported Ben Levisohn of Barron’s.
September 28, 2020
For four weeks, the U.S. stock market has sparked and sputtered like a campfire in light rain.
Today, pandemic-driven demand is providing fuel for the investors. The need for certain types of products and services has accelerated and innovation is creating new opportunities. Consider:
- Technology. Today, digital technologies support nearly all group interactions, which has accelerated innovation. Traditional video communications platforms are in high demand, and multi-person virtual platforms are emerging. Robotics innovations are racing ahead, too. Robotic dogs enforce social distancing in Singaporean parks, reported Other types of robots sanitize streets and facilitate contactless delivery around the globe.
- Consumer products and services. COVID-19 increased demand for staples, cleaning, and personal hygiene products. The virus may have inspired deeper and longer-lasting changes in consumer behavior, too. Accenture reported people are favoring healthier lifestyles, consuming goods more conscientiously, and showing a preference for locally-sourced goods.
- Healthcare, drug development/delivery, and medical equipment. Last Friday, 316 COVID-19 treatments and 212 vaccines were in development around the world, reported the Milliken Institute. In some places, humans are collaborating with artificial intelligence to streamline drug discovery processes. Demand for telehealth services has increased dramatically. So has demand for personal protective equipment, reported Pankaj Singh of Plastics Today.
September 21, 2020
Investors weren’t happy with central banks last week.
After the Federal Open Market Committee (FOMC) meeting, Federal Reserve Chair Jerome Powell confirmed the economy is recovering more quickly than anticipated:
“With the reopening of many businesses and factories and fewer people withdrawing from social interactions, household spending looks to have recovered about three-quarters of its earlier decline…The recovery has progressed more quickly than generally expected, and forecasts from FOMC participants for economic growth this year have been revised up since our June Summary of Economic Projections. Even so, overall activity remains well below its level before the pandemic and the path ahead remains highly uncertain…We remain committed to using our full range of tools to support the economy in this challenging time.”
September 14, 2020
Last week, the Nasdaq Composite Index set another record.
So far, 2020 has been memorable for many reasons, not the least of which is the incredible speed at which some events have been occurring in financial markets. This year, we’ve experienced:
- The end of the longest U.S. stock bull market in history
- A global stock market crash
- The shortest U.S. stock bear market in history
- Multiple record highs for major U.S. stock indices
Last week, we witnessed the swiftest correction on record as the Nasdaq fell by 10 percent in just three days. By the end of the week, the Index had recouped some losses and finished down 4.1 percent. The Standard & Poor’s 500 Index and Dow Jones Industrial Average also finished the week lower.
September 8, 2020
Stock markets in the United States retreated a bit last week.
U.S. stocks have been trending higher for months. Last week, they gave back some gains. The Nasdaq Composite dropped 3.3 percent, while the S&P 500 Index fell 2.3 percent, and the Dow lost 1.8 percent, reported Ben Levisohn of Barron’s.
It was difficult to pinpoint a specific reason for the market’s retreat. Levisohn offered a litany of possibilities that included:
- The Labor Day holiday
- Corporate earnings guidance suggesting companies are pulling back on tech spending
- Anthony Fauci tempering expectations a vaccine will be available by November 1
- Fears a disputed election could disrupt stock markets
- Congress’s lack of progress on a new stimulus bill
August 31, 2020
The stock market rallies like it’s 1986.
August has been a good month for stock investors. At the end of last week, the S&P 500 Index was up 6.8 percent for the month. The Index is poised to deliver its best returns for the month since 1986, when it gained 7.1 percent, reported Financial Times.
The performance of U.S. stock markets is remarkable, in part, because, so far, company earnings – the profit that publicly-traded companies earn and report each quarter – haven’t been great in 2020. Earnings were down 31.9 percent during the second quarter of the year, reported FactSet. The decline in earnings reflected the impact of coronavirus closures
August 24, 2020
The shortest bear market in history is over.
The Nasdaq Composite and Standard & Poor’s 500 Indices finished at new highs last week. The stock market is considered to be a leading economic indicator, so strong stock market performance suggests economic improvement ahead.
There was a caveat to last week’s gains, though. One large technology company was responsible for 60 percent of the S&P’s weekly gains (0.7 percent), reported Ben Levisohn of Barron’s. The same large company is also a component of the Dow Jones Industrials Index, which finished the week flat. Without that stock, the Dow would have finished the week lower. Levisohn wrote:
August 17, 2020
The Standard & Poor’s (S&P) 500 Index finished the week within a whisker of its February high, reported Randall Forsyth of Barron’s.
It’s a remarkable feat. The stock market has recovered in just 175 days. Historically, comparable recoveries (those following market drops of 20 percent or more) have taken about four years, reported Vildana Hajric, Lu Wang, and Claire Ballentine of Bloomberg Quint.
“The sharpness and speed of the downturn – and the immediacy of the overwhelming liquidity and fiscal response from the Federal Reserve and Congress – forestalled the kind of grinding, purgative action of typical bear markets, which wrings out excesses and resets valuations lower. There was also not the shift in market leadership that usually occurs in the crucible of a bear market,” reported Michael Santoli of CNBC.
August 10, 2020
There was good news and bad news in last week’s employment report.
The good news was the U.S. Bureau of Labor Statistics delivered better-than-expected data about employment. In July, the U.S. economy added about 1.8 million new jobs.
That’s about 300,000 more than the Wall Street consensus forecast, according to Jeff Cox of CNBC, who reported, “…there were wide variations around the estimates as the pandemic’s resurgence dented plans to get the shuttered U.S. economy completely back online. Forecasts ranged from a decline of half a million jobs to a rise of 3 million…”
August 3, 2020
Last week delivered a mixed bag of financial and economic news.
As many expected, the U.S. economy did not fare well during the second quarter. COVID-19 lockdowns and business closings caused productivity to fall by one-third. Real gross domestic product, which is the value of all goods and services produced by our country, dropped 32.9 percent during the second quarter of 2020, reported the Bureau of Economic Analysis. During the first quarter of the year, productivity fell by 5 percent.
The Federal Reserve held its Federal Open Market Committee meeting last week. Fed Chair Jerome Powell committed to “…using our tools to do what we can, and for as long as it takes, to provide some relief and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.”
July 27, 2020
Where are we on vaccines and treatments?
During 2020, the United States government has spent more than $13 billion on Operation Warp Speed (OWS), which is focused on accelerating the development of vaccines and treatments for COVID-19, according to The Economist. The United States is not alone. Governments around the world are funding similar research.
The Economist reported, “…with the eagerness of the pharma sector to find treatments, along with the broad range of investments made by OWS (as well as other governments), there has been a lot of progress in the search for tests, drugs, and vaccines…Even the master of caution on vaccines, Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, thinks a signal of vaccine efficacy might arrive in September.”
July 20, 2020
Is the United States economy recovering or faltering?
It depends on who you ask and which data you consider. For example, last week, the Department of Labor reported fewer people applied for first-time unemployment benefits during the week of July 11. That could be a tick in the positive data column. Week-to-week the number declined from 1.31 million to 1.30 million. The lackluster decline could be a tick in the negative data column since the long-term weekly average is about 20 percent of that number.
There was positive news about progress on COVID-19 vaccines last week. The hope it inspired was tempered by reports the number of new cases continued to grow in a majority of U.S. states.
July 13, 2020
Please don’t scream inside your heart.
Last week, a reopened Japanese theme park asked patrons to wear masks to help reduce the spread of coronavirus. It also asked them not to scream while riding the rollercoaster. “Please scream inside your heart,” park management urged.
During 2020, stock markets in the United States have taken investors on an emotional rollercoaster ride. By late March, the Standard & Poor’s 500 Index had lost more than 30 percent. The Index has since regained most of those losses, although there have been many ups and downs along the way.
July 6, 2020
What a quarter!
Who could have guessed a global pandemic would produce outsized stock market returns? Near the end of last quarter (March 23), the Standard & Poor’s 500 Index was down 30.75 percent for the year, and it looked like 2020 was going to be a disappointing year for many investors.
Since then, the S&P 500 has gained 39 percent, reported The Economist. It rose 20 percent from March 31 to June 30. The Dow Jones Industrial Average also did well, delivering its second best quarterly showing since 1938. The Nasdaq Composite finished the quarter in positive territory.
June 29, 2020
Blame it on the coronavirus.
Stock markets in the United States and Europe retreated last week as the number of new COVID-19 cases increased steadily in America. On Thursday, there were more than 44,000 new cases, the highest daily total to date, according to data from the Centers for Disease Control.
“The turn has created a new puzzle for investors, many of whom had started focusing on 2021 earnings expectations as the next performance-driver for stocks. The old market gauges, like manufacturing surveys, jobs tallies, and retail sales, feel like lagging indicators. The new leading indicators deal with the disease. Yet tracking its progress is tricky even for epidemiologists who have studied these issues for decades,” reported Avi Salzman of Barron’s.
June 22, 2020
Could it be the upside surprises?
U.S. stock markets have marched higher despite a pandemic, an economic downturn, and social justice protests – and a lot of people have wondered why.
Greg Rosalsky of Plant Money spoke with Nobel Prize-winning economist Robert Shiller about, “…the mass psychology of a gazillion buyers and sellers, who each are telling themselves their own stories about why they're making the trades they're making.”
Rosalsky and Shiller discussed some narratives that purport to explain recent market performance, including:
June 15, 2020
The Nasdaq Composite dipped its toes into record territory last week before retreating.
Stock indices in the United States rallied early last week on optimism about the reopening of businesses across the country. The Nasdaq Composite rose to 10,000 for the first time ever, before tumbling lower.
Nicholas Jasinski of Barron’s reported, “What caused the rally to sputter this past week? Nothing particularly new or unexpected. On Wednesday, Federal Reserve Chairman Jerome Powell emphasized the long, slow path back to previous levels of employment and economic activity, in contrast to the market’s lightning-fast recovery. Shocking.”
On Wednesday, the United States Federal Reserve (Fed) economic projections showed U.S. economic growth declining 6.5 percent this year with unemployment receding to 9.3 percent. In 2021, the Fed expects economic growth to improve, increasing by 5 percent, while unemployment ebbs to 6.5 percent.
June 08, 2020
The employment report electrified U.S. stock markets last week.
American stock markets responded enthusiastically to the news U.S. unemployment was 13.3 percent in May. If it seems inexplicable double-digit unemployment would thrill investors, there is a reason. The unemployment rate in April was higher at 14.7 percent, and analysts had forecast the rate in May would jump to 19.1 percent. All in all, that makes 13.3 percent look pretty attractive.
Are those green shoots?
In economic terms, green shoots are signs of improvement. If you were paying close attention, you might have seen some in economic data released last week.
They weren’t apparent in the Bureau of Labor Statistics report on the United States economy. Gross domestic product (GDP), which is the value of all goods and services produced in our country, shrank by 5 percent during the first quarter of 2020.
America is reopening, state by state.
That’s welcome news for many businesses, but we’re far from business as usual. Last week’s economic news included unemployment hitting an 80-year high, a record drop in retail sales (-16.4 percent), and an unprecedented decline in industrial production (-11.2 percent).
May 11, 2020
The stock market is not the economy.
It’s an important point to remember when headlines marvel that U.S. stock markets are moving higher while the U.S. economy is contracting. Stock markets are not mindful of the present moment. They are forward-looking, reflecting expectations about what will happen in the months and years to come, explained Mark Hulbert in a MarketWatch opinion piece.
May 4, 2020
There are signs COVID-19 may be in retreat.
Last week, the Centers for Disease Control reported, overall in the United States, for the week ending April 25 (officially week 17 of the coronavirus), the number of:
• People visiting healthcare providers with COVID-19 symptoms declined.
• Positive tests at public health, clinical, and commercial laboratories declined or remained similar.
• Deaths attributed to pneumonia, influenza, or COVID-19 declined, too, although the percentage remains above normal.
This is good news since some states are beginning to reopen.
April 27, 2020
We live in interesting times.
There is discussion about whether the saying, “May you live in interesting times,” is a blessing or a curse. At this point in 2020, we all understand why.
Last week, the world watched in consternation as the price of oil, specifically West Texas Intermediate crude oil, dropped into negative territory. The price moved below zero because a purchase date coincided with a lack of storage space. As a result, the owners of the oil had to pay to have it taken off their hands, reported Ben Levisohn of Barron’s.
April 20, 2020
Last week’s economic data was about what you might expect in the midst of a virus crisis that has shut down businesses and forced people to stay home:
• Retail sales were down 8.7 percent in March. Retail sales track demand for everything from clothing to refrigerators. The March decline was the worst monthly performance on record, according to Ben Levisohn of Barron’s.
• Oil prices fell further. Saudi Arabia, Russia, and other nations agreed to reduce oil production, but that may not be enough to steady prices. The Economist explained, “Global demand may fall by 29 [million] barrels a day this month, three times the OPEC deal’s promised cuts.”
• Earnings season began with a whimper. Just a sliver (9 percent) of the companies in the Standard & Poor’s 500 Index have reported first quarter earnings. So far, blended earnings (actual results for companies that have reported plus estimated results for companies that have not) are down 14.5 percent for the first quarter, reported John Butters of FactSet.
There were some bright spots, though, that boosted optimism in financial markets.
April 13, 2020
Why is the stock market doing so well when the COVID-19 pandemic has yet to peak?
At the end of last week, the Centers for Disease Control and Prevention reported the United States remains in the acceleration phase of the coronavirus pandemic. This phase ends when new cases of COVID-19 level off. The next phase should be a period of deceleration, and the number of cases should decline.
April 6, 2020
In the Wizard of Oz, Dorothy says to her little dog, “Toto, I've a feeling we're not in Kansas anymore.” Today, many of us understand Dorothy’s trepidation and uncertainty better than ever before.
COVID-19 has changed our world in ways previously unimaginable. In many states, Americans shelter at home, venturing out for groceries, medicine, and other essentials. Parents have become teachers guiding online schoolwork, often while balancing their own work and online meetings. We are learning to manage the loneliness, frustration, and anxiety that accompany quarantine conditions.
March 30, 2020
The United States set some records last week.
First, we became the epicenter of the COVID-19 pandemic. Popular Science explained:
“An increase of 15,000 known cases in just one day pushed the United States past Italy and China, making it the new epicenter of the pandemic…Experts suspect the actual number of U.S. cases is much higher than currently reported…the United States has tested a far lower percentage of its large population than other hard-hit countries.”
On Friday, March 27, the Centers for Disease Control (CDC) reported there were 103,321 confirmed cases and 1,668 deaths in the United States.
March 23, 2020
The coronavirus (COVID-19) continued to spread across the United States last week.
On Friday, March 13, the Centers for Disease Control (CDC) reported there were 1,629 confirmed and presumptive cases and 41 deaths. Last Friday, March 20, the numbers had increased to 15,219 cases and 201 deaths.
Governments in several states – including California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Louisiana, Maine, New Jersey, and New York – have issued shelter-in-place orders that apply to the entire state or one or more counties within the state.
March 16, 2020
Last week was one for the history books.
Mid-week, the World Health Organization (WHO) declared coronavirus a global pandemic. At the time, there were more than 118,000 cases in 114 countries, and the death toll exceeded 4,000 people. On Friday, the Centers for Disease Control (CDC) reported 46 states and the District of Columbia have been affected, so far. As of Friday, there have been 1,629 confirmed and presumptive cases and 41 deaths.
As the need for containment became clear, daily life underwent rapid change. Major gatherings, from sporting events to Broadway shows to industry conferences, were canceled. Travel was restricted.
March 9, 2020
Last week, market volatility reached levels that make many investors uncomfortable.
On Monday, the Dow Jones Industrial Average surged higher, delivering its biggest one-day point gain in history. The catalyst may have been reports that ‘Group of Seven’ (G7) finance ministers and central bank governors were meeting via conference call on Tuesday. French Finance Minister Bruno Le Maire indicated the discussion would lead to coordinated monetary efforts to address economic issues related to the coronavirus, reported Reuters.
March 2, 2020
Take a deep breath.
We have experienced downturns before.
Think back to 2018. During the last quarter of the year, major stock indices in the Unites States suffered double-digit losses, much of it during December. What happened next? By the end of 2019, those indices had reached new highs.
The reasons for, and performance following, market downturns varies. The key is not to panic.
February 24, 2020
Risk on or risk off?
The coronavirus appears to have inspired two distinct schools of thought among investors. Some investors currently favor opportunities that are considered lower risk, like Treasury bonds and gold, because they’re concerned about the potential impact of the coronavirus on the global economy. Others are piling into higher risk assets, like stocks, that could benefit if central banks (like the United States Federal Reserve) take steps to stimulate economic growth, reported Randall Forsyth of Barron’s.