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Last week, there were minor losses in the Dow Jones Industrial Average and S&P 500 as the Nasdaq posted a very minor gain. Major markets seemed to be put on “pause” as they digest problems in the U.S. Slowing job growth, a still contested presidential election and skyrocketing coronavirus cases affecting almost all of the country weighs heavy on investors minds. That however, is being offset by two potentially very effective vaccines that are expected to receive FDA approval in coming weeks.

While we are all concerned about the possibility that our economic growth could take a turn for the worse, there are positive factors to take note of. According to FactSet, the S&P 500 is reporting a year-over decline in earnings of -6.3% for the third quarter. There are 63 industries in the S&P 500, 27 of which are reporting a year-over decline in earnings for the third quarter. However, 36 are reporting year-over-year growth in earnings for the third quarter.

The first chart below shows the industries with the greatest growth in earnings. They are in order; Interactive Media & Services, Software, Automobiles, Pharmaceuticals and Biotechnology.

The chart below shows the five industries with the greatest decline in earnings. They are in order: Oil & Gas, Airlines, Hotels-Restaurants & Leisure, Banks and Entertainment.

What is extremely interesting is, if you exclude the three worst industries, OIl & Gas, Airlines and Hotels-Restaurants & Leisure, the S&P 500 would reporting year growth in earnings of +4.3% instead of -6.3%.

During this Thanksgiving holiday, we still have much to be grateful for. This is a good time to take stock and count the blessings we have. Be safe.

If you have any questions, please contact me.

The Markets and Economy

15 countries including China have signed a major trade deal. After years of tricky negotiations, the Regional Comprehensive Economic Partnership or RCEP was finalized. The agreement covers countries across the Asia-Pacific region and does not include the U.S.
A week after Pfizer announced its Covid vaccine was 90% effective, Moderna announced that tests for their vaccine showed an efficacy rate of 94.5%. The news propelled stocks to a new high by the close of last Monday.
Retail sales growth slowed to a paltry increase of 0.3% in October; the slowest pace since spring. Concerns are mounting that the America’s economic recovery is losing steam as coronavirus cases surge across the country.
Mixed signals on the home ownership front. As of October 13, 2020, 10.5% of mortgages were more than 30 days behind in their payments. That’s more than double the figure of 5% from a year earlier. However, 46,570 homes have been foreclosed on through October 31, 2020. That figure is down significantly from the 143,955 foreclosures a year ago and 230,305 foreclosures two years ago.
China issued its first bond sale with a negative yield. The $4.7 billion deal was sold in euros with 5, 10 and 15-year maturities. The bonds drew robust demand in the world’s second-largest economy.
Speaking at the Bay Area Council Business Hall of Fame Awards Ceremony, Fed Chairman, Jerome Powell, doubled down on recent remarks saying again. “We’re not going back to the same economy, we’re going back to a different economy”. He went on to say that the increase in technology isn’t going away and will benefit some groups while hurting others. The Fed Chairman also called for Congress to approve more stimulus funds saying, “The recovery is incomplete”, and that “We have a long way to go”.
Home sales skyrocketed last month to a 14-year high. The one bright spot in the U.S. economy is being fueled by historically low interest rates and a shift in some families moving from large cities to suburban areas.
Jobless claims continue to rise as economists fear the resurging pandemic could derail the recovery.

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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.

David Kover on November 23rd, 2020

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Markets Take a Pause