Markets, Economy

Weekly Kickstart (09/28/2020-10/02/2020)

9/28/20 8:00 AM

iStock-626627280.jpgStocks continued lower last week, as the S&P 500 fell by 0.63 percent to 3,298.46. That left the benchmark index up 2.09 percent 2020-to-date, and 7.89 percent below the all-time closing high hit earlier this month. Political uncertainty continued to be the main driver of the daily swings in the market during the past few trading sessions, with an additional headwind now coming from the new Supreme Court vacancy that could further delay lawmakers reaching an agreement on the next fiscal relief package, i.e. “CARES 2.0.” More generally this was the fourth weekly decline in a row for the S&P 500, and on an intraday basis it even dipped briefly into “correction territory” (at least 10 percent below the interim peak). It is important to remember, though, that the September selloff occurred after equities basically rallied the entire month of August, including the S&P 500 which rose for eight of the nine weeks preceding the current drawdown.

y783y54785

Also of note is that despite the negative week-over-week performance, much of the selling last week was quickly followed by buying the next day that helped trim the bulk of the losses by Friday’s close. Bulls will likely say this is a sign of equities establishing a bottom but at the very least it serves as another reminder of how time in the market can often outperform trying to time the market. Moreover, it may be worth again referencing the J.P. Morgan analysis which found that from January 2000 to the end of 2019, 24 of the 25 worst trading days occurred within a single month of the 25 best trading days, and 6 of the 10 best days occurred within two weeks of the 10 worst days. Of course benefiting from the “best days” typically implies staying invested, which requires remaining calm during periods of market tumult. This is not always easy, and there are indeed more potential volatility catalysts left for the markets to overcome in the near-term. This week, for example, the price action could stay choppy as traders will have to deal with the release of several important economic reports, month- and quarter-end institutional rebalancing, and of course the first Presidential debate on Tuesday. Any regular investors uncomfortable navigating this environment should consider consulting with a professional financial advisor to make sure their positioning is properly aligned with their risk tolerance, nearness to retirement, and other unique variables. As always, we are here to help with any questions you may have.

543yy34545

To recap a few of the things we learned about the economy last week, the positives included that a key gauge of business investment exceeded forecasts, mortgage purchase applications rose, existing home sales increased, new home sales surged, real estate values continued to climb, and U.S. household net worth hit an all-time high. As for the negatives, regional manufacturing metrics sent mixed signals, and the number of Americans making first-time claims for unemployment benefits remained elevated. This week the pace of economic data picks up with several important reports on factory activity, housing, consumers, inflation, and employment scheduled to be released, including the potentially market-moving release of the September job report from the U.S. Labor Department on Friday.

45y3y35445

What To Watch:

Monday

  • Dallas Fed Manufacturing Survey 10:30 AM ET

Tuesday

  • Case-Shiller House Price Index 9:00 AM ET
  • John Williams Speaks 9:15 AM ET
  • Consumer Confidence 10:00 AM ET
  • John Williams Speaks 1:00 PM ET

Wednesday

  • 2-Yr Note Settlement
  • 5-Yr Note Settlement
  • 7-Yr Note Settlement
  • 10-Yr TIPS Settlement
  • 20-Yr Bond Settlement
  • MBA Mortgage Applications 7:00 AM ET
  • ADP Employment Report 8:15 AM ET
  • GDP 8:30 AM ET
  • Chicago PMI 9:45 AM ET
  • Pending Home Sales Index 10:00 AM ET
  • EIA Petroleum Status Report 10:30 AM ET

Thursday

  • Challenger Job-Cut Report 7:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Personal Income and Outlays 8:30 AM ET
  • PMI Manufacturing Final 9:45 AM ET
  • ISM Manufacturing Index 10:00 AM ET
  • Construction Spending 10:00 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • John Williams Speaks 11:00 AM ET
  • 3-Yr Note Announcement 11:00 AM ET
  • 10-Yr Note Announcement 11:00 AM ET
  • 30-Yr Bond Announcement 11:00 AM ET
  • Fed Balance Sheet 4:30 PM ET

Friday

  • Motor Vehicle Sales
  • Employment Situation 8:30 AM ET
  • Consumer Sentiment 10:00 AM ET
  • Factory Orders 10:00 AM ET
  • Baker-Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, J.P. Morgan, FRBSL

Post author: Charles Couch

Disclosures