Monthly Market Recap: November 2, 2020

October Market Recap

November 2, 2020

Stocks fell for the second month in a row as earnings announcements and election angst were top of mind for most investors in October.

While the focus today is rightly on the imminent US elections, last month began with an eye toward corporate earnings, specifically the latest results from Technology giants responsible for some of the largest gains since March. Strangely enough, four of the five largest companies in the US stock market (Apple, Amazon, Alphabet, and Facebook) all reported quarterly earnings on the same day, October 29. The fifth company (Microsoft) reported just two days earlier.

Those announcements coincided with a spike in volatility. The S&P 500, Dow Jones Industrial Average, and NASDAQ all fell close to 6% in the final week of October, a drop made more violent by heightened anxiety about the looming Presidential election, the potential for a contested result, and which party will control the US Senate.

Utilities (+5%) was one of only two sectors in the S&P 500 to finish positive last month. Communication Services (+0.8%) was the other. Technology was the worst-performing sector, falling more than 5% for the second straight month, though it remains the best-performing sector year-to-date. Energy (-4.4%) and Health Care (-3.7%) were others that underperformed in October.

Index October 2020 YTD 2020
Dow -4.61% -7.14%
S&P 500 -2.77% +1.21%
NASDAQ -2.29% +21.61%

With roughly two-thirds of the companies in the S&P 500 having reported, 86% have beaten consensus earnings estimates, according to data analytics firm FactSet. If that number (86%) holds, it would mark the highest percentage of companies to beat estimates since FactSet began tracking such data in 2008.

Better earnings and future guidance combined with lower stock prices mean Price-to-Earnings (P/E) ratios have moderated (at least a bit) from exceptionally high levels. As of October 30, the S&P’s 12-month forward P/E stood at 20.6. That’s still well above its 5-year average (17.3), but down from 21.5 at the end of September.

The US economy posted a predictably big number when it was announced our country’s GDP grew 33.1% (annualized) in the third quarter. The GDP gains are relative, of course, coming on the heels of a 31.4% collapse in GDP during the previous three months. Time will tell if a potential third wave in COVID-19 cases and hospitalizations will derail these legitimate economic gains.

Interest rates drifted higher for the first time in months. The benchmark 10-year Treasury bond yielded 0.86% at the end of October, its highest mark since early June. 10-year Treasury yields have not eclipsed 1% since mid-March. Slightly higher rates do little, however, to appease investors searching for a reasonable return on safe assets. Our current economic environment, unfortunately, is one in which risk-free assets pay next to nothing.

One thing October did not bring was a new stimulus deal from Congress. Rumors swirled that a second, smaller legislative package could be in the works, but little materialized in negotiations between Treasury Secretary Steve Mnuchin and House Speaker Nancy Pelosi. Truthfully, the next big stimulus from Washington to help US businesses and families is unlikely to come before February, after the winners from this week’s elections have taken their seats on Capitol Hill.

That reality leaves a larger burden to bear for the Federal Reserve, who meets November 4-5 and stands ready (and definitely willing) to inject more liquidity into the system should financial markets weaken further.

Small-cap equities outperformed in October. The Russell 2000 gained 2%, considerably better than the larger-cap US indices. One month does not yet make a trend, but stronger relative performance from smaller companies is a sign investors may be rotating toward stocks that have risen less from their March lows.

October brought an interesting disparity in International equity returns. Non-US Developing Markets fell 3.6%, mostly in line with US stocks. Emerging Markets meanwhile gained 1.4% thanks to a heavy weighting in China.

Oil prices fell more than 10% last week and ended October near their lowest level since May. West Texas Intermediate Crude traded under $36 per barrel compared to roughly $40 per barrel a month ago.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: October 1, 2020

September Market Recap

October 1, 2020

Those suggesting that a furious summer rally left stock prices ripe for a pullback were at least somewhat vindicated in September. Equities entered the month at or near all-time highs before downward pressures pushed them lower.

The S&P 500 fell in four consecutive weeks – the longest such streak in more than a year – and registered a peak-to-trough decline of more than 10%. The NASDAQ, for a change, posted the worst monthly performance of the three major benchmarks as Tech stocks proved more vulnerable to the selloff.

Only two of the 11 sectors in the S&P booked gains in September, those being Materials (+1.3%) and Utilities (+1.1%). Energy (-14.5%) continued what has become an historic year-to-date collapse, having now lost nearly half its value (-48%) in the first nine months of 2020. Communication Services (-6.5%) and Technology (-5.4%) also suffered legitimate losses last month.

Index September 2020 YTD 2020
Dow -2.28% -2.65%
S&P 500 -3.92% +4.09%
NASDAQ -5.16% +24.46%

Speculation about potential vaccines for COVID-19 is understandably popular, and some encouraging rumors led equities to all-time highs early last month. It was reported on September 2 that the Centers for Disease Control and Prevention told state governments to prepare for vaccine distribution by early November. That launched the S&P near 3,600, the NASDAQ beyond 12,000, and the Dow above 29,000 for the first time since February.

From there, however, it was a downhill ride. The NASDAQ fell 10% in just three trading days. While the sudden selloff was partially attributable to stretched valuations and staggering performance since the March lows, it was also due to a realization that more stimulus from Congress was no longer inevitable, and certainly not imminent.

The major US indices continued to drift lower for most of September before bouncing a bit in the final few days of the third quarter. The latest reports on stimulus negotiations suggest a gap of roughly $600 billion in competing proposals; $2.2 trillion (from Democrats) compared to $1.6 trillion (from Republicans). As of month’s end, the House of Representatives and US Senate had yet to find common ground.

Government stimulus (or its absence) matters, of course, because we are still in a global pandemic and new cases of coronavirus are again increasing in many US states. We remain, in other words, far from the finish line. The economic recovery, meanwhile, has definitely slowed.

Disney, Allstate, American Airlines, and United were among the companies who recently announced plans to fire or furlough a combined 60,000 workers as the pandemic drags on, acting like a wet blanket on a US economy desperate for a spark. The latest employment data from the US Labor Department is expected to show that cumulatively, around 50-60% of total American jobs lost earlier this year have been recovered.

The Federal Reserve and its chairman, Jerome Powell, assumed a quieter role in September than in previous months, although the Fed continues to support financial markets through steady asset purchases. As of mid-September, the Fed had accumulated $1 trillion worth of mortgage bonds since March and now owns nearly one-third of all mortgage bonds outstanding.

Powell told Congress that the US economy needs additional support and still has a long road ahead to fully recover. The economic path, in Powell’s words, “continues to be highly uncertain.”

Bond yields remained mostly unchanged from a month earlier. The 10-year US Treasury finished September yielding 0.68%. Gold prices fell roughly 4% as the US dollar strengthened meaningfully for the first time in six months. Gold is down nearly 10% from the all-time highs it established in early August.

International equities outperformed US stocks last month. Non-US Developed Markets lost roughly 2%. Emerging Markets were down only 1%.

More and more investors seem concerned about the financial risks posed by uncertain election outcomes. September 29 brought the first Presidential debate, which gave us more interruptions than insight. Despite being widely panned afterward as a parody of our country’s political process, the fact that stocks moved higher the following day displayed the resilience of markets in the face of political uncertainty.

Some argue the predictably low taxes and deregulation offered by our incumbent President would be advantageous. Others suggest Democratic control would boost markets because it will lead to larger government stimulus. Our perspective is that nobody knows for sure, and that equities have proven successful in all types of political climates.

Resist the urge to make financial decisions based on your political preferences.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: September 1, 2020

August Market Recap

September 1, 2020

It’s getting hard to remember what down days feel like in this new stock market reality, much less a down month.

The elevator carrying US equity prices not only kept rising in August, its speed accelerated as well. The S&P 500 recorded its best month since April. The Dow Jones Industrial Average gained nearly as much as in the previous three months combined. And the NASDAQ’s technology-driven performance continues to exceed even the loftiest of expectations.

Nine of the 11 sectors in the S&P moved higher in August, with four of those gaining 8% or more. Technology climbed another 12%, the fifth month in a row Tech has risen at least 5%. Consumer Discretionary (+9.5%), Communication Services (+9.1%), and Industrials (8.6%) also yielded big returns. Energy (-2.7%) and Utilities (-1.0%) fell slightly.

Index August 2020 YTD 2020
Dow +7.57% -0.38%
S&P 500 +7.01% +8.34%
NASDAQ +9.59% +31.24%

Generally, these monthly recaps focus on major benchmarks rather than specific stocks, but Apple, which has rallied 75% year-to-date, has been one of the unofficial flag-bearers for this summer stock rally and made some significant headlines.

In the first week of August, Apple became the largest-ever single weighting in the S&P 500. At that point, it represented 6.5% of the benchmark index (IBM set the previous record in 1985). By the end of the month, Apple had completed a 4-for-1 stock split and swelled to 7.3% of the S&P.

The S&P moved higher on each of the first six trading days in August before finally recording a down-day on August 11. It had another 7-day winning streak from August 20-28. In total, the S&P was green on 16 of the 21 trading days last month, a .762 batting average. But even that doesn’t tell the whole story. Those five down-days combined added up to less than 2% of losses, a nearly total absence of downside volatility.

Gold also made headlines when it surpassed $2,000 per ounce for the first time on August 4. Gold has risen nearly 30% year-to-date and roughly 15% since we sprinkled some into our Marks Group portfolio allocations earlier this summer.

The historic monetary stimulus spearheaded by the Federal Reserve had led to expectations of higher inflation down the road, which has pumped up gold prices and led to a weakening of the US dollar. As we have written before, you need not be bearish on equities to have a positive outlook on gold.

On August 18, the S&P eclipsed its all-time high set in February, which is truly astonishing when you consider the index experienced a 34% collapse between those two dates. Now, at least in terms of the market, it’s as though the global pandemic never happened.

Federal Reserve Chairman Jerome Powell announced changes to the Fed’s official policy at their annual summit (traditionally held in Jackson Hole, Wyoming). The Fed’s revised inflation target will be one that “averages 2% over time,” but allows for higher inflation following periods when inflation is especially low.

In other words, the Fed will be less likely to apply the brakes in periods of strong economic activity by raising interest rates. The change reinforces beliefs that interest rates will remain exceptionally low for an exceptionally long time, even after unemployment falls considerably.

The Fed revisions led to a rise in US Treasury yields, relatively speaking. 10-year Treasury yields approached 0.75% late in the month, their highest point since June.

US home prices continue to hit new highs. The latest data from Case-Shiller shows that home prices nationally have risen 4.3% from a year earlier and 64% from the Great Recession lows in 2012.

Phoenix (+8.9%) and Seattle (+6.8%) recorded the largest increases in the last 12 months. Minneapolis (+5.5%) was fifth. Much of the gains are being driven by low supply. Inventory at the end of July was down 21% compared to a year earlier, according to the National Association of Realtors.

International equity prices lagged US stocks in August. Non-US Developed Market equities gained 4.7% last month. Emerging Market stocks increased 2.9%. Oil prices rose slightly to $42.61 per barrel, up roughly 6% from a month earlier.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: August 3, 2020

July Market Recap

August 3, 2020

Virus? What virus?

You’d never know we were in the midst of a global pandemic by watching the stock market last month. The only thing spreading on Wall Street these days seems to be optimism.

Despite the spread of coronavirus and the corresponding American death toll both accelerating in July, US equity prices remained largely immune from worsening public health conditions. Stocks surged enough for the S&P 500’s year-to-date return to turn positive; truly incredible when you consider the economic context.

Although second quarter corporate earnings and GDP data confirmed expectations of the largest year-over-year decline in our nation’s history, enough bad news was priced in that markets weathered the deluge of negative numbers like it was more of a drizzle.

All but one of the 11 sectors in the S&P were firmly positive (+3.8% or better) in July. Consumer Discretionary, Utilities, and Materials all gained more than 7%. Only Energy (-5.1%) failed to move higher.

Index July 2020 YTD 2020
Dow +2.38% -7.39%
S&P 500 +5.51% +1.25%
NASDAQ +6.82% +19.76%

For the entirety of this stock recovery, it’s been a tale of two market caps. Led by big technology companies, larger-capitalization companies have performed considerably better than small- and mid-caps. That trend continued in July with the S&P 500 (+5.5%) doubling the return of the Russell 2000 (+2.7%).

Looking beyond the broader indices, it wasn’t so much “up days” and “down days” as it was the “stay-at-home” stocks vs more cyclical industries. In other words, ugly reports about new COVID-19 diagnoses or lack of policy progress didn’t generate a widespread selloff. It just tilted the seesaw from one category of stocks to the other.

Second quarter GDP fell nearly 33% from a year earlier, the worst short-term economic contraction in American history. New unemployment claims, as of July 30, also increased for the second consecutive week, according to the US Labor Department. The latter is evidence of the economic backslide in many US states as a resurgence in coronavirus cases caused another round of business closures.

Quarterly earnings for Big Tech delivered, sending the NASDAQ at least 6% higher for the fourth month in a row. Not even Congressional testimony given by the CEO’s of Apple, Facebook, Amazon, and Alphabet (Google) could slow the steamrolling those stocks and their shareholders have enjoyed. Anti-trust concerns will likely lead to the break-up of those companies eventually, but politicians have more important priorities and any such action is likely years down the road.

Speaking of which, Congress failed to pass a second round of fiscal stimulus prior to its scheduled August recess. It’s still unthinkable (especially in an election year) that another trillion-dollar package isn’t coming from Capitol Hill, which is why equities have not yet reacted negatively to political delays. It’s simply a matter of “when” and “how much” regarding the next oversized batch of federal government aid.

Federal Reserve Chairman Jerome Powell acknowledged on July 29 that “The path forward for the US economy is extraordinarily uncertain and will depend in large part on our success keeping the virus in check.” Officially, Fed policy remains unchanged with Powell reiterating that rates will stay exceptionally low for an extended period of time.

Ten-year US Treasury yields fell to 0.54% as of July 31, down from 0.65% a month earlier. Crude oil rose slightly to $40.27 per barrel, though that didn’t stop energy stocks from sliding further.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: July 1, 2020

June Market Recap

July 1, 2020

Inequality was everywhere in the first six months of 2020. Or perhaps it’s more accurate to say eyes were opened to the inequality that has saturated our country and the world for generations.

As we try to put the first half of the year into context, that seems a recurring theme. In the early stages of the COVID-19 pandemic, some countries were hit especially hard while others had the benefit of extra time and medical data to prepare. Once the US economy effectively shut down in March to slow the spread of the virus, certain industries (hospitality, travel, restaurants, retail) struggled to survive while others (technology, media, etc.) remained relatively insulated.

Data, meanwhile, showed that low-income Americans were disproportionately affected by the pandemic in terms of job security, likelihood of virus exposure, and healthcare. This undoubtedly contributed to Americans’ response to the death of George Floyd by Minneapolis police and the national protests that followed.

As economic uncertainty gripped financial markets, stocks fell indiscriminately in February and March. In both April and May, all 11 sectors in the S&P 500 climbed higher.

June, however, shined a brighter light on the “haves” and “have-nots” when it comes to individual companies. The three major US equity benchmarks booked gains last month, but a peek under the hood reveals not all cylinders are firing.

Six of the 11 sectors in the S&P 500 were negative, with Utilities (-4.7%) and Health Care (-2.4%) the worst of those. Technology (+7.1%) returned the largest gains, climbing more than 7% for the second month in a row. Consumer Discretionary (+5%) was close behind.

In terms of year-to-date performance, Tech (+15%) and Consumer Discretionary (+7.2%) are the only two sectors with positive returns. Halfway through 2020, four sectors in the S&P 500 have lost more than 10%; Energy (-35.3%), Financials (-23.6%), Industrials (-14.6%), and Utilities (-11.1%).

When it comes to diagnosing recent performance, it’s Big Tech and everything else. The year-to-date spread between the NASDAQ and the Dow is incredible.

Index June 2020 YTD 2020
Dow +1.69% -9.55%
S&P 500 +1.84% -4.04%
NASDAQ +5.99% +12.11%

The first week of June saw stocks still riding the momentum from previous months.  A shockingly positive jobs report on June 5 showed the US economy added 2.5 million jobs in May. The national unemployment rate, as cited in the report, fell to 13.3%, a surprise big enough to jolt the Dow 830 points higher.

On June 9, the NASDAQ eclipsed 10,000 for the first time, a milestone especially impressive considering it came during a global pandemic and economic recession.

The next day, Fed Chair Jerome Powell committed to keeping interest rates near zero for another two-and-a-half years, though 2022. Powell also said the pace of the Fed’s asset purchases (i.e. bond buying) would accelerate in the months to come.

In his own words: “We’re not even thinking about thinking about raising rates,” Powell said. That’s not a typo. Powell went to great lengths to suggest it will be a long time before the Fed Funds rate moves higher.

Suggestions of favorable policy were outweighed, however, by the Fed’s sobering economic outlook of a 6.5% contraction in GDP this year followed by 3-5% GDP growth in 2021 and 2022. Once the news was digested, stocks sold off aggressively on June 11, which proved to be the market’s worst single-day drop since the March 23 low. The Dow fell nearly 1,900 points (6.9%).

The economic data did show reasons for optimism. The latest retail sales and consumer spending figures showed a sharp rebound from previous months and further fueled hopes for a sharper recovery. All of that, of course, is predicated on the idea that public health conditions improve rather than worsen.

The momentum in equity prices stalled in the second half of June and much of that can be attributed to the reality that, medically speaking, the spread of coronavirus is again accelerating in much of the country.  Infectious disease expert Dr. Anthony Fauci admitted earlier this week, “We are moving in the wrong direction,” in terms of virus containment, and said he would not be surprised if the US eventually reports 100,000 new cases per day later this summer.

The results of the banking sector’s latest stress tests also threw some cold water on stock bulls late in June. In order to ensure our country’s largest financial institutions “maintain enough capital to weather the economic strain brought on by the current recession,” the Fed banned stock buybacks and imposed limitations on the size of stock dividends for the 33 largest US banks.

Oil prices rose 10.7% in June with West Texas Intermediate Crude ending the month at $39.70 per barrel. Rising oil helped Emerging Market equities (+6.6%) outperform last month. Non-US Developed Markets (+3.5%) also fared relatively well, thanks in part to the US dollar weakening.

Ten-year US Treasury bonds yielded 0.65% as of June 30, unchanged from a month earlier. Ten-year yields did climb as high as 0.96% on June 5 before retreating.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: June 1, 2020

May Market Recap

June 1, 2020

As the calendar turns to summer, temperatures, tensions, and ticker symbols continue to rise.

While the pace slowed compared to the historic gains we saw in April, stock prices generally kept chugging higher in May. Both the S&P 500 and Dow Jones Industrial Average gained more than 4% last month, while the NASDAQ seemingly lapped the field rising almost 7%.

The remarkably swift recovery for equities, in other words, just keeps going. Since its intraday low on March 23, the S&P 500 has now risen 39% and sits only 10% below its all-time high (set February 19). After another exceptionally strong month, the NASDAQ is firmly positive year-to-date and within 4% of its February high.

For the second month in a row, all 11 sectors in the S&P 500 climbed higher. This after two consecutive months (February and March) in which all 11 sectors were negative. Technology (+7.1%) led the charge in May with Materials (+7.0%) and Communication Services (+6.0%) close behind. Consumer Staples (+1.5%), Energy (+1.9%), and Real Estate (+1.9%) gained the least.

Index May 2020 YTD 2020
Dow +4.26% -11.06%
S&P 500 +4.53% -5.77%
NASDAQ +6.75% +5.76%

May was not without its bumps. The Dow suffered its first three-day losing streak since early March, culminating with a 517-point drop on May 13 after Federal Reserve Chair Jerome Powell said the Fed’s economic outlook was “highly uncertain and subject to significant downside risks.”

A few days later, however, Powell’s comments on CBS program 60 Minutes marked a turning point in sentiment. The Dow rocketed 912 points (+3.9%) the day after Powell’s interview, with even larger single-day gains in the Russell 2000 (+6.1%) and crude oil (+11.5%). The fact that several US states began re-opening non-essential businesses certainly contributed to the optimism.

Stock prices in May also jumped more than once on positive developments regarding a vaccine for the COVID-19 virus. While the news is hopeful, medical experts have been quick to remind us that such trials remain in their early stages and it’s unlikely any vaccine will be widely available before 2021.

Growth stocks (+6% in May), tripled the returns of their value counterparts (+2%) last month, although that trend has begun showing signs of a reversal. Small-cap stocks, for example, outperformed meaningfully last month as the Russell 2000 increased 6.4%. As investors start to have more conviction about a strong economic recovery in the second half of the year, the companies and sectors that lagged in recent months have begun to close the performance gap.

The final report card showed a 15% drop in first-quarter earnings for S&P 500 companies compared to a year earlier. Roughly 63% of companies beat consensus forecasts, which sounds constructive but was actually the lowest such percentage of “beats” for any quarter in more than 7 years.

While valuations are admittedly more difficult to calculate with future forecasts so cloudy, there’s little doubt stocks are again trading at lofty numbers. The forward price-to-earnings (P/E) ratio of the S&P 500 finished May at 21.5, according to FactSet. That’s notably higher than the index’s P/E in mid-February, when it traded at 19x forward earnings.

The latest economic numbers showed a mix of good and bad, but provided enough encouraging data for investors to focus on the positives. US consumer spending tumbled almost 14% in April, the largest monthly decline since the government began tracking those numbers in 1959. Jobless claims nationally have eclipsed 40 million, meaning one in four working Americans have lost their jobs since the pandemic began.

Hospitality and transportation data, however, showed meaningful increases in both hotel occupancy and airline travel. New home sales rose more than expected in April. Consumer confidence also moved higher after steep declines the previous two months.

The death of George Floyd at the hands of Minneapolis police on May 25 ignited the flames of protest as Americans all over our country filled the streets demanding justice for the four officers involved, one of whom was arrested and charged with third-degree murder. It’s too early to know how long the civil unrest might linger or whether large groups of public protesters will accelerate the spread of COVID-19, which could bring economic consequences.

The sudden change in the news cycle focusing on Floyd’s death and resulting protests made it easy to overlook important developments between the US and China. Political rhetoric between the world’s two largest economies escalated sharply last month.

Several times, Donald Trump publicly blamed China for not better containing the coronavirus and threatened action if Chinese leaders passed a controversial national security law regarding Hong Kong. When China did pass such legislation late in May, Trump announced a new set of retaliatory measures that include stripping Hong Kong of its special/exempt status on trade and travel.

Speculation is growing about whether the countries’ “Phase One” trade deal will ever be implemented. Given the stock market’s focus on US-China relations in recent years, it’s a topic that could certainly affect investor sentiment in the months to come. Emerging Market equities (+3.0% last month) lagged US stocks in May. Non-US Developed equities (+5.4%) outperformed slightly.

Oil prices nearly doubled in May. West Texas Intermediate Crude finished the month at $35.49 per barrel, up from $18.84 at the end of April. That’s still well-below the January highs of $63 per barrel.

Ten-year US Treasury bonds ended May yielding 0.65% (compared to 0.62% a month earlier).

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: May 1, 2020

April Market Recap

May 1, 2020

The laws of gravity dictate that what goes up must come down. Isaac Newton discovered no such law applicable to financial markets, but history has proven the inverse does indeed apply to equities. When it comes to the major US benchmarks, at least, what goes down will inevitably come back up.

Exceptionally oversold conditions in late March and what seems a never-ending supply of stimulus ignited a historic rebound rally in April. Although the COVID-19 pandemic remains far from over, the S&P 500 (+12.7%) and Dow Jones Industrial Average (+11.1%) notched their largest monthly gains in 33 years. It was the S&P’s third-best month since World War II. The NASDAQ’s 15.5% bounce was its biggest since June 2000.

From the March 23 lows through the end of April, the S&P has risen 33%. In five weeks. It remains uncertain whether this snapback in stock prices is sustainable or instead proves to be a bear market rally. For now, at least, it infused investors and portfolios desperate for gains after the sharp declines in prior months.

All 11 sectors in the S&P 500 moved higher in April with six of those gaining 12% or more. Energy (+29.8%) led the way for a change, though it remains the worst-performing sector so far in 2020. Consumer Discretionary (+20.6%) also generated strong returns. Typically-defensive sectors like Utilities (+3.2%) and Consumer Staples (+6.9%) rose the least.

Index April 2020 YTD 2020
Dow +11.08% -14.69%
S&P 500 +12.68% -9.85%
NASDAQ +15.45% -0.93%

April gains reached the lofty numbers above despite starting the month with a thud. The Dow fell 974 points on April 1. The next day gave us an almost unbelievable 6.7 million weekly jobless claims. Combined with the prior week, it meant at least 10 million Americans lost their jobs in two weeks, roughly equivalent to the total number of claims filed in the first six-and-a-half months of the 2007-09 recession.

An hour into trading on April 2, the Dow was actually 350 points higher, an indication of just how much bad news was already priced into equity markets. By the end of April, a staggering 30 million Americans had filed unemployment claims according to the US Department of Labor.

The latest medical reports show roughly 1.1 million Americans have been infected with coronavirus and at least 64,000 have died. The number of daily reported deaths nationally seems to have plateaued but not decreased. Shelter-in-place mandates and other lifestyle changes have successfully “flattened the curve,” in other words, but the evidence does not suggest an end to this pandemic is coming anytime soon.

First-quarter GDP numbers were even worse than consensus expectations. The US economy contracted 4.8% from a year earlier. It was the first year-over-year decline in six years and we already know second-quarter GDP will be far worse due to economic shutdown measures that did not take effect until March. Consumer spending, the largest component of GDP, fell 7.6%.

The strong rebound in stock prices despite such ugly economic data suggests a willingness by investors to look beyond what will surely be a deep, but hopefully short-lived, recession this year. The steady stream of massive stimulus announced by Congress and the Federal Reserve has made it easier to take the long-view.

We will avoid the nitty gritty details of various Fed and government programs announced since this epidemic began, but the sheer magnitude of support is tough to overstate. The Congressional Budget Office said in April that the response to COVID-19 could lead our federal budget to quadruple this year.

The Fed and our lawmakers’ willingness to support businesses and families was key to the April rally, but will also bring long-term consequences. Fed Chair Jerome Powell acknowledged as much when he said, “Now is not the time to worry about debt, but use the great fiscal power of the US to avoid deeper damage to the economy.”

Ten-year US Treasury bonds ended April yielding 0.62% (compared to 0.70% a month earlier). Interest rates seem destined to remain near historical lows for the foreseeable future. According to the Fed’s official statement on April 29, it “expects to maintain this target (rate) range until we are confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”

Large-cap stocks have weathered this economic uncertainty better than small-caps, although that gap narrowed somewhat later in April. The Russell 2000 gained 13.7% last month, better than both the Dow and S&P. Technology companies with especially large market capitalizations generally remain the best performers. As a sector, Technology finished April with positive year-to-date returns, compared to a 9.9% year-to-date loss for the S&P 500.

In a sign of how unusual these economic and market conditions truly are, crude oil traded below zero for a few days in April. Specifically, the contracts for May delivery traded with negative prices last month. Due to a combination of high production and evaporating global energy demand, negative prices indicated oil producers were literally willing to pay buyers to take oil off their hands in order to avoid storage costs.

It was the latest once-in-a-lifetime event to happen during this pandemic. It’s probably safe to say there will be more to come.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: April 1, 2020

March Market Recap

April 1, 2020

Books will be written about what happened in America and in financial markets during March 2020.

Last month was historic for many reasons: The official declaration of COVID-19 as a global pandemic, government-mandated closures of schools and businesses, full-scale cancellation of public events, the degree of volatility in equity and bond markets, oil prices falling below $20 per barrel, massive central bank stimulus, and a $2.2 trillion federal rescue package, to name a few.

These are extraordinary times. Our country is facing a public health crisis that has led to an unprecedented economic shutdown. As you would expect, those are conditions that led to an exceptional amount of downward pressure on markets.

For the second consecutive month, all 11 sectors in the S&P 500 were negative. Eight of those suffered losses of 10% or more. Health Care (-3.8%) and Consumer Staples (-5.4%) weathered the storm best. Financials (-21.3%) and Energy (-34.8%) continue to be mired in a downward spiral. The Energy sector has lost more than 50% total in the last three months.

Index March 2020 YTD 2020
Dow -13.74% -23.20%
S&P 500 -12.51% -20.00%
NASDAQ -10.12% -14.18%

The numbers above make it obvious how much damage has been inflicted upon Corporate America and family retirement savings. It’s worth sharing that the final six trading days of March were mostly positive for stocks. While the S&P 500 finished the first quarter 24% below all-time highs, the index has bounced 18% off its March 23 low.

This publication, as its name implies, is traditionally a recap, but in this particular instance, most of our readers probably don’t want or need a line-by-line synopsis of what amounts to a financial injury report. Looking ahead, rather than back, seems a more worthwhile exercise.

It’s important that you know in times of market distress, the members of our Marks Group team are people and resources you can rely on. Our advisors and administrative staff are working harder than ever, whether in our office or from their homes. Our investment committee and portfolio managers continue to actively manage our model portfolios and make tactical adjustments where appropriate.

Much of the near-term future remains uncertain, so I’ll focus the remainder of this letter on what I do know.

1 Current predictions are unreliable

The information superhighway of 2020 makes it easier than ever to read an opinion (or publish your own) about what is next for the stock market and the US economy. The rapid decline of stock prices, which fell 34% peak-to-trough from February 19 thru March 23, seems to have encouraged some especially polarized predictions.

Most agree (Marks Group included) that a US and global recession is near certain. From there, predictions on the severity and length of the economic slowdown vary wildly. Extreme views make for good headlines, but realistically the outcome will be somewhere in the middle. I’d caution investors from having too much conviction one way or the other.

2 We’re still in the early stages of this new reality

Historic volatility has accelerated the pace of this selloff in stocks. Price movements that typically take months have occurred in a matter of weeks or days. On March 24, the Dow spiked 11.4% in a single day. Historically speaking, that’s a good YEAR! From Tuesday through Thursday last week, the S&P 500 rose 20% in three days.

Swings that large make it tempting to conclude we are further along in this new market reality than we really are. Bear markets don’t come and go in six weeks. The coronavirus pandemic that triggered this selloff will, according to the experts, continue to worsen in the coming weeks. The answer to whether March 23 ultimately proves to be the bear market bottom may well depend upon when the virus peaks. Even after we return to our normal lives, questions will linger about a potential relapse and whether consumer spending picks up where it left off.

3 The Fed is all-in

Say what you will about the longer-term risks of adding trillions more to the federal deficit. That’s a legitimate challenge for another year and another administration. As it pertains to the current crisis, the cornucopia of monetary stimulus announced by the Fed in recent weeks is already bigger than previous measures from 2008. Our country’s central bank will do “whatever it takes” to support our economy and our financial markets.

Liquidity injections have already added some measure of calm and helped avoid potential market malfunctions. Historically low interest rates, massive lending, and widescale asset purchasing won’t eradicate the coronavirus, but those policies will help corporations and consumers regain their financial health more quickly once the recovery begins.

4 Investors will have added flexibility this year

The $2.2 trillion fiscal stimulus package passed by Congress last week is meant to act as a life raft to corporations, small businesses, and consumers struggling to survive this widescale economic slowdown. Several aspects of the CARES Act are meant to give investors more flexibility with their money.

Here are some of the highlights:

Direct payments up to $1,200 per individual or $2,400 per married couple, plus an additional $500 per child, courtesy of Uncle Sam. Those payments will decrease for annual incomes over $75k (individuals) or $150k (married).

Enhanced unemployment benefits that will provide more money (up to an additional $600 per week) for a longer period (up to four months) to more people (expanded eligibility) affected by the fallout from COVID-19.

Tax filing deadline for 2019 has been extended to July 15. This applies to federal income tax returns, although most states (including Minnesota) have extended state income tax filing deadlines as well. If you have already filed your return and owe a balance, you have three extra months to settle up.

Required Minimum Distributions from IRA’s have been suspended. For those individuals age 70 ½ or older, you will no longer be required to withdraw money out of your IRA’s or other qualified retirement plans in calendar year 2020. This also applies to those individuals turning age 72 in 2020 who would otherwise have begun taking RMD’s this year.

Elimination of the 10% penalty on IRA withdrawals taken prior to age 59 ½ for “affected persons” meaning health or financial hardship brought on by COVID-19. This applies to distributions up to $100k and is retroactive to include any early distributions already taken since January 1, 2020. Early distributions will still be taxable at ordinary income rates, but the corresponding tax bill can be paid over three years OR the account owner may instead “undo” the withdrawal by paying the dollars back into their IRA within three years following the distribution date.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: March 2, 2020

February Market Recap

March 2, 2020

The stock market can no longer boast a clean bill of health.

As reported cases of Coronavirus spread beyond Chinese borders, so too did concerns about its ability to bring the global economy to a screeching halt.

Those concerns snowballed into panic in the final week of February. The S&P 500 established a new all-time high on February 19. Less than six full trading days later, the S&P had fallen 10%, the fastest correction in history.

When financial markets closed on February 28, the S&P sat roughly 13% below its Feb. 19 high. The Dow Jones Industrial Average sank 14% from its February high through month’s end, giving up more than 4,000 points in the process. That included a 1,191-point plunge (-4.4%) on February 27.

The sudden and sobering reality: This was the worst single week for US equities since October 2008.

All 11 sectors in the S&P fell sharply last month, with the “best-performing” categories still booking losses greater than 6%. Communication Services (-6.3%) and Real Estate (-6.3%) held up better than most. Financials (-11.2%) and Energy (-14.6%) were hit hardest.

Index February 2020 YTD 2020
Dow -10.07% -10.96%
S&P 500 -8.41% -8.56%
NASDAQ -6.38% -4.52%

The World Health Organization has yet to classify the Coronavirus (COVID-19) outbreak as a “pandemic,” but that distinction matters little to investors, or to American families for that matter. Although the number of reported infections and deaths in the US has yet to accelerate, it’s the uncertainty that fueled such a serious selloff.

At this point, any guess at the true economic impact remains speculative.

Among the questions without quantifiable answers:

  • How many US businesses will close at least temporarily?
  • How long might those operations be shuttered?
  • How significant will the drop in consumer spending (and traveling) be?
  • How big will the impact be on US corporate earnings?

While the speed of this latest correction in stock prices is indeed exceptional, a reminder that 10% pullbacks are not at all unusual. Last week’s was the 7th correction of at least 10% since March 2009, and each one proved to be a buying opportunity.

Our view is that a meaningful adjustment in equity prices appears justified, especially considering valuations for the S&P 500 had risen to their highest level in a decade. Let’s not confuse a correction, however, with the end of this 11-year bullish trend in US equities. The threats from Coronavirus no doubt increase the possibility of a US recession, but by no means is that the inevitable outcome.

One factor that will (again) influence how markets behave going forward is Federal Reserve policy. Until late February, it was widely assumed the Fed would stand pat with interest rates in the first half of 2020, but it now appears realistic the Fed could drop rates further as early as March.

Indeed, the hope for a near-term Fed cut helped the Dow rally nearly 1,300 points on the first trading day of March, its largest single-day point gain ever. While the Fed is supposed to be agnostic to short-term market movements, its members will likely be sensitive to “disappointing” markets in this especially volatile environment.

With or without a policy change, interest rates have slipped to their lowest levels in history. Ten-year US Treasury yields fell below 1.3% in February for the first time ever and finished the month yielding 1.13% (compared to 1.92% only two months ago). That is also well below the previous all-times low of 1.34% set in July 2016. Two-year US government bonds yield only 0.90%.

International equities held up better last month than some might have expected. Emerging Market equities, of which China is by far the largest regional weighting, lost 3.8% in February. Non-US Developed Equities dropped 7.8%. The Chinese city of Wuhan, of course, is ground zero for the Coronavirus so it’s encouraging that China’s stock market proved somewhat more resilient as the country continues its efforts to contain the outbreak.

Oil prices continued to sink precipitously last month. West Texas Intermediate Crude finished February at $44.76 per barrel as the economic slowdown in China and other emerging markets has flattened near-term demand. Oil has now fallen roughly 30% from its early January highs.

 

 

 

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.

Monthly Market Recap: February 3, 2020

January Market Recap

February 3, 2020

Military conflicts and public health scares overshadowed the usual economic agenda in January. At month’s end, the stock market was still trying to make sense of the uncertainty caused by the Coronavirus outbreak in China, not to mention the variety of paths forward that could emerge in the wake of Donald Trump’s impeachment, Democratic primaries, and elevated tensions in the Middle East.

Start-to-finish performance in January was relatively benign. The S&P 500 and Dow both lost less than 1%, while the NASDAQ continued to outperform. But the day-to-day equity charts more closely resembled so many New Year’s resolutions at the local gym: A slow and steady climb for the first three weeks, followed by an abrupt fall-off that cancelled out all the hard-earned gains.

Six of the 11 equity sectors in the S&P 500 increased last month, though only three booked gains of 1% or more. Utilities (+6.7%) and Real Estate (+1.4%) were the beneficiaries of falling interest rates. Technology (+4.0%) got an added boost when the sector’s largest names delivered strong earnings.

Five equity sectors delivered losses in January, with Energy (-11.1%) and Materials (-6.2%) hit especially hard.

Index January 2020 YTD 2020
Dow -0.99% -0.99%
S&P 500 -0.16% -0.16%
NASDAQ +1.99% +1.99%

It’s been long ago buried by an avalanche of news, but it was only four weeks ago that a US drone targeted and killed Iran General Qassem Soleimani, sparking a tense military conflict between the two countries. After a few days of national mourning, Iran responded by firing missiles at US-occupied military bases in Iraq, although that response resulted in no deaths.

On January 8, President Trump addressed the nation and suggested Iran was “standing down” from further military engagement, allowing equity markets to effectively shrug off the whole episode and almost immediately return to all-time highs. Later in January, three rockets were fired at the US Embassy compound in Baghdad, injuring one person. It’s a reminder that while a major conflict seems to have been avoided, tensions remain elevated.

On January 15, China’s chief trade negotiator and US officials put pen to paper in Washington, formalizing “Phase One” of their trade agreement. The deal, which had been agreed to in principle for three months, eliminated new US tariffs on Chinese goods but resulted in only limited rollbacks of tariffs already in place. By the end of January, China was already requesting added flexibility regarding some of its Phase One pledges as the country grapples with containing the Coronavirus amid a public health crisis.

That outbreak, which began in the city of Wuhan, has so far resulted in 362 reported deaths and more than 17,000 infections, according to China’s Health Commission. The death toll is already higher than that attributed to the SARS outbreak in 2002-03.

From an investment standpoint, health scares and pandemics have universally proven to be only temporary setbacks, but an outbreak that has yet to be contained certainly has the potential to affect investor sentiment and trigger a spike in volatility. We saw evidence of that late in January. The Dow fell 454 points on January 27 and another 603 points on January 31.

Roughly halfway through fourth-quarter earnings season, the scorecards for most S&P 500 companies have revealed better-than-expected numbers. About two-thirds of the reporting companies have beaten consensus estimates, and cumulative earnings are on pace to decline only 0.3% from a year earlier (compared to median forecasts of a 1.6% decline). With so many non-financial headlines dominating the news cycle, perhaps it’s no surprise that earnings beats and misses have both resulted in smaller-than-average price swings in their underlying stocks.

The Federal Reserve made no changes to the Fed Funds rate at its late January meeting. Consensus expectations call for the Fed to remain neutral with monetary policy for the first half of 2020. It was hardly a benign month for rate movements, however. Ten-year Treasury yields fell sharply in January, closing at 1.52% (compared to 1.92% at year-end). Yields are approaching all-time lows (1.34%) set in July 2016.

Emerging Market stocks and oil prices both sank in January as the spread of Coronavirus put a major dent in Chinese energy demand. After peaking above $63 per barrel on January 6, West Texas Intermediate Crude fell all the way to $51.56 per barrel at month’s end. WTI Crude last traded below $50 in December 2018. As a category, Emerging Markets fell 6.2% last month.

 

 

 

The investment objective of the Marks Group Core Equity portfolio is long-term growth, with a secondary objective of dividend income.

Securities offered through LPL Financial, Member FINRA / SIPC. Investment Advice offered through Marks Group Wealth Management, a registered investment advisor and separate entity from LPL Financial.

Marks Group Wealth Management performs in-house analysis on companies.  Statistical information on mentioned companies is obtained from company reports, news releases and SEC filings.  The information set forth herein has been derived from sources believed to be reliable, but is not guaranteed as to accuracy and does not purport to be a complete analysis of the securities, companies or industries involved. Opinions expressed herein are subject to change without notice.  Additional information is available upon request.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments and strategies may be appropriate for you, consult with us at Marks Group Wealth Management or another trusted investment adviser.  Mention of individual equities in this commentary are for informational purposes only and are not intended to represent a recommendation.

Stock investing involves market risk including loss of principal. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. International and emerging market investing involves special risks such as currency fluctuation and political instability. These risks are often heightened for investments in emerging markets.  No strategy assures success or protects against loss.  Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.

Past performance is no guarantee of future results.  All indices are unmanaged and may not be invested into directly.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

MSCI EAFE Index consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.

The Barclays Aggregate Bond Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment-grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.

Stock prices and index returns provided by E-signal.