Markets, Economy

Weekly Kickstart (11/02/2020-11/06/2020)

11/2/20 8:00 AM

iStock-626627280.jpgThe pullback intensified last week, as the S&P 500 fell by 5.64 percent to 3,269.96. That left the benchmark index up 1.21 percent 2020-to-date, and 8.68 percent below the all-time closing high. In the previous Kickstart we said that investors were likely to finalize any pre-election portfolio adjustments during these past few trading sessions, which along with another CARES 2.0 negotiation breakdown and a global flareup in coronavirus cases is probably the best explanation for last week’s sharp selloff. The latest drawdown was also enough to more than erase all of the gains from earlier in the month and leave the S&P 500 down 2.77 percent at the end of October. That was the second monthly decline in a row and much worse than the average monthly gain of 0.46 percent October has normally enjoyed since 1928. On the bright side conditions, at least historically, tend to improve going forward as the broad index has risen in November roughly 60 percent of the time during the past 90+ years and experienced a mean monthly gain of 0.72 percent.

y783y54785

Average returns look even better for December and January and altogether these next three months have typically been the best period to be invested in equities. Of course it is also important to reiterate that past performance does not guarantee future returns, and 2020 in many ways has been anything but typical. This is not just because of the pandemic but also because it is an election year, and in the immediate future any favorable seasonality could easily be ignored while market participants wait to see what voters do at the polls this week. Many regular investors have opted to stay put until the event risk subsides, according to a recent survey which found that 60 percent of respondents do not plan to make any portfolio adjustments ahead of November 3. The “wait-and-see” attitude exists even as 86 percent of surveyed investors said that they expect the election to have a “moderate or significant” impact on financial markets. This apparent calmness is likely in part a reflection of confidence in their positioning, whereas those less comfortable navigating the potentially choppy post-election markets could benefit from working with a professional financial advisor to analyze their investments. Moreover, these periodic reviews of your positioning can help identify potential portfolio imbalances ahead of time rather than waiting until the market has already moved against you and your options feel much more limited. 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 mortgage applications ticked higher, real estate values continued to rise, personal income growth firmed, consumer inflation pressures remained muted, regional manufacturing gauges improved, demand for American-made durable goods jumped, an important measure of U.S. business investment exceeded analysts’ expectations, and gross domestic product in Q3 posted its largest quarterly increase on record. As for the negatives, new home sales unexpectedly fell, pending home sales disappointed forecasts, consumer confidence cooled, 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 the U.S. service sector, manufacturing, construction activity, productivity, consumers, small business, and employment scheduled to be released. That includes the potentially market-moving October job report from the Labor Department due out on Friday, as well as another monetary policy announcement from the Federal Reserve on Thursday.

45y3y35445

What To Watch:

Monday

  • 2-Yr Note Settlement
  • 5-Yr Note Settlement
  • 7-Yr Note Settlement
  • 20-Yr Bond Settlement
  • PMI Manufacturing Final 9:45 AM ET
  • ISM Manufacturing Index 10:00 AM ET
  • Construction Spending 10:00 AM ET

Tuesday

  • Motor Vehicle Sales
  • Factory Orders 10:00 AM ET

Wednesday

  • FOMC Meeting Begins
  • MBA Mortgage Applications 7:00 AM ET
  • ADP Employment Report 8:15 AM ET
  • International Trade in Goods and Services 8:30 AM ET
  • ISM Services Index 10:00 AM ET
  • EIA Petroleum Status Report 10:30 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

Thursday

  • Challenger Job-Cut Report 7:30 AM ET
  • Jobless Claims 8:30 AM ET
  • Productivity and Costs 8:30 AM ET
  • EIA Natural Gas Report 10:30 AM ET
  • FOMC Announcement 2:00 PM ET
  • Fed Chair Press Conference 2:30 PM ET
  • Fed Balance Sheet 4:30 PM ET

Friday

  • Employment Situation 8:30 AM ET
  • Baker Hughes Rig Count 1:00 PM ET
  • Consumer Credit 3:00 PM ET
 

 

Sources: Econoday, FRBSL

Post author: Charles Couch

Disclosures