Markets, Economy

Weekly Kickstart (10/12/2020-10/16/2020)

10/12/20 8:00 AM

iStock-626627280.jpgThe market rebound continued last week, as the S&P 500 rose by 3.84 percent to 3,477.14. That left the benchmark index up 7.63 percent 2020-to-date, and just 2.90 percent below the all-time closing high. Encouraging headlines about CARES 2.0 and a potential COVID vaccine continued to be a source of upside risk for equities during the past few trading sessions, but a sharp albeit short-lived selloff on Tuesday demonstrated just how much investors care about the former. This should not be too surprising considering that one of the key reasons why domestic stocks have generally outperformed their foreign peers this year is that the fiscal response to the pandemic has been much larger in the U.S. than in other developed nations, and hence the snapback in economic activity has been much broader and faster here than overseas. Regardless, the price action of late continues to provide more examples of how some of the biggest rallies in the market are often in close proximity to the sharpest selloffs.

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Many new investors learn this the hard (expensive) way, such as the 42 percent of participants in a recent Lending Tree survey who said that they sold at least one stock when the coronavirus-related market tumult first began. Nearly nine in ten of these investors admitted that they regret that decision, including 69 percent who regret selling “a great deal.” Refraining from such reactionary trading can understandably be difficult, especially when markets experience selloffs as violent as what occurred earlier this year. Further, nearly half of surveyed investors indicated that they started checking their portfolio more frequently since the pandemic began, which even pre-COVID would have increased the likelihood of observing an adverse balance change, and in turn potentially more kneejerk trading decisions. None of this means that investors should never sell but simply that the apparent urgency to “get out” some people feel may be a sign that their positioning is inappropriate for their unique situation, e.g. nearness to retirement, risk tolerance, etc. Moreover, if the mere thought of another market selloff is causing you to lose sleep at night then your exposure to stocks may be too high. Regular reviews of your positioning can help identify these potential problems ahead of time so that you are better prepared for the next drawdown, in turn making it easier to benefit from the “best days” and avoid panicking at a potentially inopportune time. Additional assistance is available by consulting with a professional financial advisor and as always, we are here to help with any questions you may have.

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To recap a few of the things we learned about the economy last week, the positives included that activity in the U.S. services sector expanded at a faster rate, and an important gauge of Americans’ confidence in the labor market strengthened. As for the negatives, the nation’s trade deficit widened, mortgage purchase applications declined, consumer credit disappointed forecasts, total job openings fell, and the number of Americans claiming unemployment benefits remained elevated. This week the pace of economic data picks up slightly with a few important reports on manufacturing, small business, consumers, and inflation scheduled to be released.

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What To Watch:

Monday

  • Neel Kashkari Speaks 9:00 AM ET

Tuesday

  • NFIB Small Business Optimism Index 6:00 AM ET
  • CPI 8:30 AM ET

Wednesday

  • MBA Mortgage Applications 7:00 AM ET
  • PPI-Final Demand 8:30 AM ET
  • Robert Kaplan Speaks 6:00 PM ET

Thursday

  • Jobless Claims 8:30 AM ET
  • Philadelphia Fed Manufacturing Index 8:30 AM ET
  • Empire State Manufacturing Index 8:30 AM ET
  • Import and Export Prices 8:30 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • EIA Petroleum Status Report 11:00 AM ET
  • 5-Yr TIPS Announcement 11:00 AM ET
  • 20-Yr Bond Announcement 11:00 AM ET

Friday

  • Retail Sales 8:30 AM ET
  • Industrial Production 9:15 AM ET
  • Business Inventories 10:00 AM ET
  • Consumer Sentiment 10:00 AM ET
  • Baker Hughes Rig Count 1:00 PM ET
 

 

Sources: Econoday, Lending Tree, New York Times, FRBSL

Post author: Charles Couch

Disclosures