Market Commentary 11/9/2020

Market Commentary 11/9/2020

How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment Portfolio >

Weekly Financial Market Commentary

November 9, 2020

Our Mission Is To Create And Preserve Client Wealth

It’s said markets hate uncertainty, but that wasn’t the case last week.

Despite tremendous uncertainty about the outcome of the United States election, major domestic and international stock indices moved higher and the CBOE Volatility Index, better known as Wall Street’s fear gauge, moved 35 percent lower. Ben Levisohn of Barron’s reported:

“By all accounts, it should have been a terrible week for the stock market. At the close of trading on Friday, we still didn’t know whether Joe Biden or Donald Trump had won or which party would control the Senate. There was also set to be at least two recounts – one in Georgia, and one in Michigan – with likely more to come. It’s the kind of uncertainty that the market is supposed to hate.”

Yet, there was little fear to be found in financial markets. Investors’ confidence may have been grounded in a wave of positive economic news:

·         15 of 18 manufacturing industries grew in October. The ISM’s Manufacturing Purchasing Manager’s Index rose 3.9 percent in October. The Index finished at 59.3 percent, an indication manufacturing is improving and the economy is growing.

 ·         Rates remained low. The Federal Reserve kept rates near zero, which supports economic growth. The Fed’s Open Market Committee statement indicated supportive monetary policy would continue. “The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.”

·         People are going back to work. More jobs were created in October than economists expected. The Bureau of Labor Statistic’s Unemployment report showed 638,000 new jobs for October. The U-3 unemployment rate fell to 6.9 percent. That’s an improvement on April’s unemployment level of 14.7 percent.

While that’s all good news, the number of coronavirus cases in the United States continued to increase last week. Randall Forsyth of Barron’s reported, “As politics at long last fades as a factor, the renewed surge in COVID-19 cases looms large…Even without renewed mandated lockdowns, however, people are apt to hunker down voluntarily…that could dampen the labor market’s recovery.”

A SALUTE TO VETERANS AND GOLD STAR FAMILIES.
This week we celebrate Veterans Day. The U.S. Department of the Interior is celebrating by giving veterans and Gold Star families free access to national parks, wildlife refuges, and other public lands, reported the U.S. Department of Veterans’ Affairs.

To gain free admission on Veterans Day 2020 – and every day after – anyone who has served in the United States Armed Forces, including the National Guard and Reserves, can show one of the following forms of identification:

·         Veteran ID Card

·         Department of Defense ID Card

·         Veteran Health Identification Card

·         Veteran’s designation on a state-issued driver’s license or state ID card

The most frequently visited National Park Service sites across the country include:

·         Golden Gate National Recreation Area

·         Blue Ridge Parkway

·         Great Smoky Mountains National Park

·         Gateway National Recreation Area

·         Lincoln Memorial

·         George Washington Memorial Parkway

·         Lake Mead National Recreation Area

·         Natchez Trace Parkway

·         Grand Canyon National Park

·         Gulf Islands National Seashore

Happy Veterans Day!

Weekly Focus – Think About It
“There is nothing so American as our national parks…The fundamental idea behind the parks…is that the country belongs to the people, that it is in process of making for the enrichment of the lives of all of us.”
–Franklin Delano Roosevelt, 32nd U.S. President

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Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

 

Investment advice offered through Research Financial Strategies, a registered investment advisor.

Election Day and your Portfolio

Election Day and your Portfolio

Two-hundred and seventy.  That’s how many electoral votes it takes to win.  As of this writing, on the afternoon of Wednesday, November 4, 2020, neither candidate has reached that magical number yet – and it may be some time before we know who will.

As you’ve probably heard us say before, uncertainty is the thing investors fear most, and as of right now, there’s still a lot of uncertainty regarding this election.  It’s no surprise, then, that many of our clients have asked us about the election lately and how it may affect their portfolio.  We’ll get to that in a second, but the first thing we want to say is: If you’re nervous, you can relax.  And if you’re relaxed, you can stay that way!  In this case, all this uncertainty was expected, and it’s no surprise the election is still up in the air.  

In a normal year, most Americans are accustomed to either watching the TV on election night, waiting for the media to call the various states in favor of one candidate or another.  Or maybe you’re the type who prefers to just go to bed early and see who won in the morning, (which is probably the healthier option).  But this is not a normal year…and it’s certainly not a normal election.

Here’s the situation.  Due to the COVID-19 pandemic, more Americans are voting by mail or ballot box than ever before.  That means election officials have to do things a little differently.  Some states have laws preventing mail ballots from being counted until after a certain point.  Take Pennsylvania, for example.  In 2019, the state approved “no-excuse” absentee ballots, where any voter can request a mail ballot without needing to cite a reason.1  At the same time, however, Pennsylvania law requires officials to wait until after the polls closed on election night before they could begin counting those mail ballots.  And many counties in the state waited until Wednesday morning to start processing those ballots.  Since mail-in ballots often take longer to verify than in-person ballots, the result is a delayed timeline.  In fact, it may be several days before all the votes are counted there.  

Another variable at play here is that some states – Nevada and North Carolina, for example – will count mail ballots that arrive after the election but were postmarked before.2  So, some states may not officially declare a winner until next week, although the media may call those races earlier if they feel there’s enough data on who will win.  

As luck would have it, nearly all the states we’re still waiting on are key “battleground” states that both candidates are desperately trying to win.  Many of these so-called swing states, each coming with a hefty number of electoral votes, are still processing their ballots.  That’s why many states remain “too close to call” by the media, although some will finish counting sooner than others.   

As of this writing, the following states are still up in the air: Alaska, Arizona, Georgia, Maine, Michigan, Nevada, North Carolina, Pennsylvania, and Wisconsin (Fox News did call Wisconsin for Biden at 3:20 this afternoon).  Some will almost certainly finish counting today.  Others, like Pennsylvania, may take several more days or even weeks.  So, while we may have a strong idea of who the winner is by the end of the day, it also may take much longer.  

The important thing to remember here is that the media does not decide the winner of each of these states.  Nor, frankly, do the candidates.  It’s true that the media will “call” each race as soon as they feel certain of the outcome, and they’re usually – but not always – right.  But these calls are technically meaningless.  Every county in this nation conducts their own election overseen by a county clerk.  Those votes are then tabulated – and the results certified – by each state’s Secretary of State.  Sometimes this process takes longer than others, and it’s been expected for months that the process would take particularly long in 2020.  So, my advice is to relax and focus on other things.  Most importantly, try to ignore all the gossip being thrown around on social media.  Much of it is fearmongering, and both sides of the aisle are guilty of it.  (That said, let’s all spare a thought for the thousands of people across this country who have volunteered their time to man polling locations and count ballots.  Many stayed up all night; many more will continue working for days.  It’s a hard, thankless job – but there is no more important responsibility in our nation right now.  If you know one of these people, please thank them for me!)

Before we put the final period on this message, I wanted to leave you with a quick thought about your portfolio.  We mentioned before that uncertainty is what investors hate most, but as of this writing, the markets are handling this uncertainty rather well.  We also know that politics and emotion go hand-in-hand.   It’s easy to react emotionally and fear what the election will mean for your hard-earned money.  That’s why I want to reassure you of three things:

1.   Historically speaking, the outcome of a presidential election has a relatively small impact on the markets.   Historically, the S&P 500 has gone up 10.8% under Democratic presidents and 5.6% under Republicans.3 Either way, the markets have risen over time.  Of course, we must always remember that past performance is no guarantee of future results.  But the point is, making investment decisions based solely on who sits in the White House is not a good idea.  

2.   From a policy standpoint, both Trump and Biden could bring positives and negatives when it comes to the markets.  I’ll send more info about this when we know who the winner is.  In the meantime, remember: our investment strategy is designed to get you through more than one election cycle, and its success does not depend on politics.  While political developments may prompt us to make tweaks here and there, our strategy is based on far more important factors.  

3.   Regardless of who wins, our team will be constantly studying the markets and keeping an eye on your portfolio.  If we ever feel changes need to be made, we’ll contact you immediately.  

In the meantime, let us know if you have any questions or concerns.  We’d be happy to chat.  Have a great day!          

Market Commentary 11/9/2020

Stock Market Commentary November 2, 2020

How Are Your Investments Doing Lately?  Receive A Free, No-Obligation 2nd Opinion On Your Investment Portfolio >

Weekly Financial Market Commentary

November 2, 2020

Our Mission Is To Create And Preserve Client Wealth

Last week, financial markets and economic data told very different stories.

Reviewing economic data is a bit like looking in a rearview mirror. Typically, it offers information about what is behind us. For example, last week we learned:

  • The U.S. economy grew by 33.1 percent during the third quarter of 2020. Strong growth helped boost America’s Gross Domestic Product (GDP), which is the value of all goods and services produced in the nation. At the end of the quarter, GDP was about 3 percent lower than a year ago, reported The Economist.
  • Personal income increased in September, and so did spending on goods and services. Americans bought more clothes, cars, and car parts, and spent more on healthcare and recreation.
  • New claims for unemployment insurance moved lower last week. Unemployment remains high overall, but a slowdown in new claims is positive.

Despite positive trends in economic data, major U.S. stock indices delivered their worst performance since March 2020. Financial markets are the windshield. They show us what investors anticipate may be ahead. Last week, it was clear investors were not optimistic. There were a number of reasons they may have been concerned:

  • The number of coronavirus cases in the United States and around the globe is on the rise. In Europe, Germany, France, the United Kingdom, and other nations have closed segments of their economies and tightened limits on social distancing. “The more serious the virus spread becomes, the more economic restrictions get put in place. That, in turn, applies economic pressure and spooks investors,” reported CNBC.
  • New U.S. stimulus was delayed. Democrats and Republicans were unable to agree on the terms for a new stimulus package before the election. Concern that stimulus measures might be delayed until next year helped push stock indices lower last week.
  • Election uncertainty is high. “The election looms large as the biggest wild card risk for markets, and there is a real concern that no outcome could lead to a period of uncertainty and turbulence for markets and the economy,” reported CNBC.

It’s possible we may see more market volatility this week.

WE ARE ALL IN THIS TOGETHER. It’s election week, and Americans of all political persuasions are bracing themselves. We’re worried about short-term events and the long-term future of the country. In part, that’s because sharp partisan divides have obscured an important fact: Americans agree on a lot of things.

For example, in October, More in Common, a nonpartisan nonprofit working to bring Americans together, published the results of surveys conducted from June through September 2020 in partnership with YouGov.

The group’s report, Democracy for President, found the majority of Americans (81 percent) agree that democracy is imperfect but preferable to other forms of government. In addition, Americans:

  • Say it’s important to live in a country that is governed democratically (92 percent)
  • Agree voting is a way they can improve the country (88 percent)
  • Feel a sense of pride in being an American when they vote (81 percent)
  • Go to the polls to honor those who fought for the right to vote (80 percent)

About 7-in-10, “…say that elections in the United States are generally safe and trustworthy, and this number differs little between Democrats and Republicans.”

A majority of the Americans surveyed were concerned about election integrity. Regardless of party affiliation, they were uneasy about election officials and politicians discouraging voting (80 percent), results not being available on election day (75 percent), and the possibility of fraud if there is a long wait for results (73 percent).

It’s notable, even in our concerns about this election, we are worried by the same things.

As the week progresses, remember the United States of America has been holding elections for almost 250 years. We held elections during the Civil War, World War I, and World War II. Our robust election tradition has endured over generations because of our shared belief democracy is the best form of government.

That doesn’t mean Americans will always agree. We won’t – and that’s why we vote.

Weekly Focus – Think About It
“…should things go wrong at any time, the people will set them to rights by the peaceable exercise of their elective rights.”
–Thomas Jefferson, 3rd President of the United States

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Investment advice offered through Research Financial Strategies, a registered investment advisor.
* This newsletter and commentary expressed should not be construed as investment advice.
* Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.  However, the value of fund shares is not guaranteed and will fluctuate.
* Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.
* All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. You cannot invest directly in an index.
* The Dow Jones Global ex-U.S. Index covers approximately 95% of the market capitalization of the 45 developed and emerging countries included in the Index.
* The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market.
* Gold represents the afternoon gold price as reported by the London Bullion Market Association. The gold price is set twice daily by the London Gold Fixing Company at 10:30 and 15:00 and is expressed in U.S. dollars per fine troy ounce.
* The Bloomberg Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998.
* The DJ Equity All REIT Total Return Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones.
* The Dow Jones Industrial Average (DJIA), commonly known as “The Dow,” is an index representing 30 stock of companies maintained and reviewed by the editors of The Wall Street Journal.
* The NASDAQ Composite is an unmanaged index of securities traded on the NASDAQ system.
* International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
* Past performance does not guarantee future results. Investing involves risk, including loss of principal.
* The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete.
* There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
* Asset allocation does not ensure a profit or protect against a loss.
* Consult your financial professional before making any investment decision.
* To unsubscribe from the Weekly Market Commentary please reply to this e-mail with “Unsubscribe” in the subject.

 

Investment advice offered through Research Financial Strategies, a registered investment advisor.

 

Sources:
https://www.economist.com/finance-and-economics/2020/10/29/what-gdp-can-and-cannot-tell-you-about-the-post-pandemic-economy (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-02-20_TheEconomist-What_GDP_Can_and_Cannot_Tell_You_About_the_Post-Pandemic_Economy-Footnote_1.pdf)
https://www.bea.gov/news/2020/personal-income-and-outlays-september-2020
https://www.dol.gov/ui/data.pdf
https://www.barrons.com/articles/stock-market-suffers-worst-week-since-march-heres-why-51604106556?refsec=the-trader (or go to https://peakcontent.s3-us-west-2.amazonaws.com/+Peak+Commentary/11-02-20_Barrons-The_Stock_Market_Succumbed_to_the_Sum_of_All_Fears-Footnote_4.pdf)
https://coronavirus.jhu.edu/map.html
https://www.axios.com/coronavirus-restrictions-europe-photos-83d40078-aa87-4ca2-9d26-b57d7f499e74.html
https://www.cnbc.com/2020/10/28/bidens-polling-lead-adds-to-market-fears-the-economy-will-need-to-wait-until-next-year-for-stimulus.html
https://www.usnews.com/news/elections/articles/2020-10-29/democrats-trump-eye-coronavirus-stimulus-deal-in-lame-duck-session
https://www.cnbc.com/2020/10/28/bidens-polling-lead-adds-to-market-fears-the-economy-will-need-to-wait-until-next-year-for-stimulus.html
https://www.cnbc.com/2020/10/30/investors-are-hoping-for-a-clear-presidential-and-senate-election-outcome-to-end-the-sell-off.html
https://dfp-production.cdn.prismic.io/dfp-production/35854289-c9da-4687-9803-b3c259832eac_Democracy+for+President+Report_PDF.pdf (Page 7)
https://founders.archives.gov/documents/Jefferson/99-01-02-3559

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