Ready to schedule an appointment?

GET STARTED

Markets Drift Lower….Looking for Guidance.

It was another volatile week for U.S. markets. I don’t know how many times I looked at my monitor, turned away for a few minutes, and looked back to see the Dow Jones Industrial Average (DJIA) move several hundred points in one direction or the other. Both the DJIA and the S&P 500 posted a loss for the fourth consecutive week. The Nasdaq was able to rise a little over 1% snapping a three-week losing streak.
There was plenty to concern markets last week. On the employment front, jobless claims are stuck at very high levels. The number of applications for unemployment benefits has held steady in September at just under 900,000 a week. Six months into the coronavirus pandemic, employers are uncertain about the strength of any economic recovery. Analysts have noted that many employers held onto workers hoping the pandemic would be short-lived with little economic impact. With the reality of things moving forward at a snails pace, employers are starting to reduce their workforce to compensate. Both manufacturing and the service sector are both in an expansion period but less than last month. Consumer spending is on the uptick too, but analysts aren’t sure if this is real growth or pent up demand from lockdown.
On a positive note, in a year filled with “What next?”, I found this interesting chart below. So far this year, we have seen the S&P 500 index (SPX) produce a daily gain of 1% or more in 26% of trading days (48 instances out of 183 trading days). This is the highest percentage in a year since 1938! On the flip side, the SPX has dropped 1% or more in 21% of trading days this year, which is the highest percentage since 2009. The graph below shows the percent of days the SPX has gained 1% or more for each year, going back to 1928. All things considered, equity markets are holding up pretty well.
I expect the market will continue in this holding pattern until more economic data shows the recovery will continue.
If you have any questions, please let me know.

The Markets and Economy
  • The Congressional Budget Office said the U.S. economy is likely to grow more slowly in coming decades, and the public debt burden will increase more than previously forecast due to the pandemic. 2020-2050 growth figures are now estimated to average 1.6% annually, down from about 1.85%.
  • Growth in the service sector slowed slightly to 54.6 in September from the previous month’s reading of 55. A composite of purchasing managers index in the U.S. was 54.4 down slightly from 54.6 the month before. A reading above 50 shows an economy expanding.
  • Prices for many cuts of meat have returned to pre-pandemic levels after rising due to sickened meat-plant workers forced shutdowns affecting product availability. Some products, including chicken wings and prime rib are cheaper now than they were before the pandemic began.
  • Federal Reserve officials said the economy was likely to need additional government spending to avoid an uneven and protracted recovery from the coronavirus pandemic. The Fed has already announced plans to keep interest rates near zero until inflation reaches 2% and possibly even higher.
  • Low interest rates are not only benefitting consumers, but also the government. The average interest rate that the U.S. government pays on its interest-bearing debt as of 8/31/20 was 1.795%, down from 2.331% as of 12/31/15. That means our government can borrow almost 30% more money today than it borrowed 5 years ago and still have the same out-of-pocket interest expense cost.
  • According to the Office of Management and Budget, fiscal year 2020 ends in 9 days on 9/30/2020, completing the largest budget deficit in our nation’s history. Through 8/31/2020, the government’s budget deficit had reached $3.007 trillion, more than double the previous red-ink record of $1.413 trillion from fiscal year 2009.
  • U.S. ports received ships carrying 2.06 million containers loaded with cargo during the month of August 2020. That’s the largest number ever recorded in a monthly survey compiled since 2002.
  • Home sales rose again in August for the third consecutive month. Sales for previously owned homes rose 2.4% from a month earlier according to the National Association of Realtors. Sales for new homes rose a strong 4.8%. New home sales are now up 43.2% from this time last year.
  • A potential partial government shutdown was averted last week as Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi reached an agreement on a spending bill. Farm aid and nutrition assistance were main sticking points government officials were able to reach a consensus on.


Offices in Chicago, Kansas City, St. Louis, Naples & Valparaiso.
The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
Consult your financial professional before making any investment decision. You cannot invest directly in an index. Past performance does not guarantee future results.
Note: All figures exclude reinvested dividends (if any). Sources: Bloomberg, Dorsey Wright & Associates, Inc. and The Wall Street Journal. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly.
Securities offered through Triad Advisors, member FINRA/SIPC. Imvestment advice offered through Resources Investment Advisors, LLC, an SEC-registered investment adviser. Resources Investment Advisors. LLC and Vertical Financial Group are not affiliated with Triad Advisors.