Monthly Market Recap: May 3, 2021

April Market Recap

May 3, 2021

The buy-the-dip mentality that has become ever more popular among investors in these bullish of times is getting more difficult. The dips have disappeared.

Out of 21 trading days in April, the S&P 500 rose 12 times. Of the nine “down days,” none approached as much as a 1% drop and only three recorded losses of at least 0.5%. Only once did the S&P fall on consecutive days (April 19-20).

It all added up to gains north of 5%, while the NASDAQ finished with similar monthly returns (for a change). The Dow Jones Industrial Average rose about half as much. All the major US stock indices hit record highs in April before trading mostly sideways in the final two weeks.

Consumer Discretionary stocks booked the largest gains of any S&P sector, rising 8.8%. Communication Services (+7.9%) and Real Estate (+7.1%) also posted large increases. Energy (-1.3%) was the only sector to finish lower, but remains the best-performing sector year-to-date. Consumer Staples (+0.4%) also lagged.

Index April 2021 YTD 2021
Dow +2.71% +10.68%
S&P 500 +5.24% +11.32%
NASDAQ +5.40% +8.34%

Corporate earnings are back in the spotlight and the results so far have lived up to the considerable hype. As of month-end, roughly 60% of S&P 500 companies had reported first-quarter results and nearly 90% of those beat consensus earnings estimates. Cumulatively, earnings have grown 46% compared to a year ago when the same companies were reporting in the midst of a global economic shutdown.

Strong earnings, a strong US consumer, and the tsunami of liquidity unleashed by the Federal Reserve continue to stoke inflationary pressures. As measured by the Consumer Price Index, the pace of inflation has reached its highest level in 2 ½ years, showing a year-over-year increase of 2.6%.

Inflation is especially evident in commodity prices. Crude oil rose 7.5% in April. Copper, steel, and natural gas all gained more than 10% last month. Lumber prices are at all-time highs with futures contracts trading roughly four times above their typical price at this time of year. On the Chicago Mercantile Exchange, lumber prices have risen by the daily maximum allowed in nine of the last 17 trading days.

Jerome Powell and the Fed, however, have shown no signs of adjusting dovish monetary policy. In late April, Powell struck a familiar tone in referring to inflation as temporary and reiterating the Fed’s current pace of asset purchasing is appropriate.

It’s no surprise the Fed remains exceptionally accommodative, but it also begs the question, “If central banks don’t raise interest rates or taper liquidity in times of economic strength, when will they?”

American GDP rose at a seasonally adjusted rate of 6.4% in the first quarter. Weekly unemployment claims have fallen to their lowest levels since the pandemic took hold in early 2020.

The only news that seemed to upset markets in April were reports that the Biden administration could double capital gains rates paid by Americans with taxable income over $1 million. That triggered an intraday selloff in equities that proved temporary. Even if such a change were to be implemented, it would not represent a major hurdle for market momentum, in our view.

Small-cap stocks, as measured by the Russell 2000 index, slowed their roll a bit, gaining “only” 2.1% in April. The index has gained nearly 15% through the first four months of 2021.

International equities also lagged last month. The MSCI EAFE index of Non-US Developed economies rose 3%. Emerging Markets increased 1.2%, though it’s notable that China reported first-quarter GDP growth of 18.3% from a year earlier.

US 10-year Treasury yields finished at 1.63% (compared to 1.75% a month earlier). Gold prices increased 3.6%.

The battle to vaccinate the country against COVID-19 hit a speed bump in April when the US Food and Drug Administration temporarily halted the use of Johnson & Johnson’s single-dose vaccine. The pause was lifted weeks later after it was determined rare cases of blood clots posed no serious threat to the public.

 

 

 

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, 2021

March Market Recap

April 1, 2021

Some anniversaries are easier to remember than others.

March 23 is a significant one. It marks the date of the bear-market bottom established one year ago, when the S&P 500 had fallen 35% and COVID-19 was still new to our vocabulary.

You would have been laughed out of your local investment club (or your first Zoom happy hour) at the time for suggesting stocks were on the verge of a 70% rally in the year to come. And yet 12 months later, this is where we are.

Better than 70% actually if we include gains from the final week of March. The S&P finished the first quarter of 2021 on the verge of hitting 4,000 for the first time. The Dow Jones Industrial Average recently eclipsed 33,000. And the NASDAQ, despite cooling its jet-like acceleration in recent months, has nearly doubled from its March 23, 2020 low.

In a complete reversal from a year ago, every one of the 11 sectors in the S&P 500 moved higher in March. Utilities (+10.5%) and Industrials (+8.9%) climbed the most. Technology (+1.7%) was the worst performer as a rotation out of high-valuation growth names continued. Energy (+2.8%) also lagged last month, though it remains the best-performing sector year-to-date.

Index March 2021 YTD 2021
Dow +6.62% +7.76%
S&P 500 +4.24% +5.77%
NASDAQ +0.41% +2.78%

Bonds rarely get top billing in these summaries, but inflation concerns and rising interest rates have become more significant drivers of stock prices in recent months. 10-year Treasury yields continued to surge higher in March, reaching 1.75% (compared to 1.46% a month earlier). As recently as New Years Eve, those yields were below 1%.

The move is rooted in expectations of especially strong economic growth. The Federal Reserve in March boosted its growth outlook for the US economy to 6.5% in 2021, sharply higher than the 4.2% it forecast in December. The Fed has yet to adjust its near-zero rate policy, but the bond market is essentially making that change on its own.

Fed Chair Jerome Powell has been adamant the Fed will allow inflation to trend higher than its official 2% per year long-term target and focus instead on what is best for the US labor market. The early March employment report showed 380,000 jobs were added to the economy in February (nearly double consensus expectations). January data was revised higher as well.

The pairing of still dovish central bank policy with government spending sprees seems an entrée investors can’t get enough of. On March 11, President Joe Biden signed into law his $1.9 trillion stimulus package, which includes $1,400 checks and an expanded child tax credit for eligible Americans, among other things. Although the bill was passed with zero Republican support, polls suggest the vast majority of American voters approve of the legislation, including 40-60% of registered Republicans.

It’s no surprise “free money” is generally met with open arms, although growing inflation pressures reflect the reality that trillions in liquidity won’t come without some long-term costs. With his approval numbers high and his Democratic majority in tact (for now), Biden has already shifted the political attention to a proposed $2 trillion infrastructure plan that would raise the corporate tax rate. It will, no doubt, remain in the Washington spotlight for months to come.

Small-cap and tech stocks both lagged the broader market in March. The Russell 2000 index gained less than 1% last month, although its 12.4% year-to-date return still doubles the S&P 500. The NASDAQ, meanwhile, recorded an official correction by dipping a full 10% from its mid-February high. It has since recaptured about half those losses.

Large-cap Value stocks remained popular and have outperformed Large-cap Growth for seven weeks in a row. International equities offered a mixed bag as Non-US Developed stocks rose 2.5% in March, but Emerging Markets fell slightly.

Oil prices reached their highest point in two years thanks in part to the latest OPEC production agreement. West Texas Intermediate crude touched $66 per barrel in March before retreating.

The rate of US vaccinations continues to accelerate. 100 million Americans, roughly 30% of the population, have now received at least one does of the COVID-19 vaccine.

 

 

 

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 1, 2021

February Market Recap

March 1, 2021

Detective Chinatown 3, released in Chinese movie theaters in February, broke the record for the biggest opening weekend for a single country in box office history.

What do Chinese moviegoers have to do with a recap of markets? It’s an example of investors’ current focus: As the curtain begins to slowly close on COVID cases, the spotlight turns to people clamoring to leave their house and spend.

With vaccines rolling out across the US and hospitalizations down 64% since their January peak, investors are focusing on the reopening of the economy. While the 3 major indices were up in February, the reopening trade was reflected in what sectors outperformed. The S&P 500 Pure Growth Index (think stay-at-home stocks) was flat on the month while the S&P Value Index (think cyclical stocks) was up 10.61%. The pandemic’s worst sectors were February’s best: Financials (+11.49) and Energy (22.84%).

Index February 2021 YTD 2021
Dow +3.43% +1.41%
S&P 500 +2.76% +1.72%
NASDAQ +1.01% +2.47%

Small company stocks, viewed as more economically-sensitive than large company stocks, continued their recent outperformance and finished the month up 6.23%. International stocks finished up 2.26%.

Economic reports released in February provided further confidence in a strengthening economy. Retail sales blew past economists’ expectations, a 5.3% increase versus a consensus estimate of 1.2%. January new home sales were the highest January numbers in 15 years. Economists credited low rates and fiscal stimulus for the strong results.

And more stimulus looks to be coming. The House passed President Biden’s $1.9 million stimulus bill at the end of February. It makes its way to the Senate this week. Although the bills details may change, there is little doubt more money will land in consumers’ hands.

The bond market is a believer in the strengthening economy as treasury yields increased in February, which often coincides with economic expansions. In fact, the bond market thinks the economy might grow too hot. The 10-year treasury spiked to 1.6%, a one-year high and finished the month at 1.4%. The spike in bond yields spooked the stock market at the end of the month. With stocks bouncing near all-time highs, some investors found the higher rates attractive and sold stocks to buy bonds. The NASDAQ took the brunt of the selling and fell 4.92% the last week of February.

Some investors also worry the higher yields suggest higher inflation is imminent. Although inflation has shown up in certain areas and grabbed headlines, like lumber (+26% YTD) and gasoline (+40% YTD), overall or Core Inflation has remained stubbornly low and is well below the Federal Reserve’s 2% target.

 

 

 

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 1, 2021

January Market Recap

February 1, 2021

If you are among the investors who believe January performance helps to forecast what will happen in the year ahead, well, your crystal ball remains a little murky after the first month of 2021.

The Dow Jones Industrial Average and S&P 500 both finished lower in January, but the tech-heavy NASDAQ managed to stay positive. International equities produced similarly mixed returns. Emerging Markets gained 3.2% last month while Non-US Developed equities lost 0.8%. Large cap stocks were generally down. Small caps stocks were mostly up.

The mixed results feel appropriate if you acknowledge all the variables this market is trying to make sense of:  The new balance of political power in Washington. Encouraging vaccine data but historically high new cases of COVID. Massive liquidity still filtering its way through the financial system. And most recently, the short-squeezing saga of Reddit users high on GameStop shares targeting hedge funds in a high-profile Main Street vs Wall Street battle.

Just four of the 11 sectors in the S&P 500 delivered profits in January. Only two of those, Energy (+3.8%) and Health Care (+1.4%) booked gains of at least 1%. Consumer Staples (-5.2%) and Industrials (-4.3%) were the worst-performing categories.

Index January 2021 YTD 2021
Dow -2.04% -2.04%
S&P 500 -1.11% -1.11%
NASDAQ +1.42% +1.42%

Believe it or not, it was less than a month ago that the balance of American political power was still up for grabs. Two runoff elections in Georgia on January 5 produced victories for Raphael Warnock and Jon Ossoff, an unexpected outcome that gave Democrats control of the US Senate, along with the House of Representatives.

The day after, January 6, brought a riot and storming of the US Capitol that resulted in five people dead. One week later, the House impeached Donald Trump for “incitement of insurrection,” effectively scheduling a strange final episode to Trump’s most unusual presidency. On January 20, Joe Biden was sworn in as the country’s 46th President.

It was, by any standard, an incredibly bizarre series of events and yet the stock market behaved as though the political theater was performing a mere dress rehearsal. The S&P 500 rose 4% between January 4 (the night before the runoff elections) and January 20 (the date of Biden’s inauguration).

To be honest, we view the political circus more as a distraction than a meaningful driver of market movements, so it was a pleasant surprise to see all three major US stock indices trading near all-time highs on January 25. What happened next was truly unpredictable.

The Dow, S&P 500, and NASDAQ all fell more than 3% in the final week of January, triggered in part by the high-profile short-squeeze involving GameStop and other stocks coordinated by a pool of investors on Reddit message boards. Although the extreme volatility was concentrated in only a handful of stocks (Blackberry, AMC Entertainment, Bed Bath & Beyond, and American Airlines among them) concerns of market manipulation created unease and no doubt increased the selling pressure.

Our view is that the GameStop story is unlikely to have any lasting consequences for long-term investors. Hedge funds will certainly be more mindful of disclosing their short positions, but major regulatory changes are not in the cards. If anything, it’s more reason to stick with traditional (long-only) investments and custody assets with large broker-dealers, rather than discount trading platforms that restricted market access to some clients.

Buried in the drama of the GameStop headlines, another quarter of corporate earnings were being reported in late January. And yet again, real earnings are beating consensus expectations. With 37% of companies reporting, the S&P 500 is on pace for a blended earnings decline of 2.3%, according to FactSet data research. Consider that as of year-end, projections called for a cumulative decline of 9.3%, year-over-year.

Small-cap stocks, as mentioned earlier, continued their relative outperformance. The Russell 2000 increased 5% last month. That’s after climbing more than 30% in the final three months of 2020, the best quarter for small-caps in more than 40 years.

Emerging Markets were the other noticeable outperformer in January, thanks to positive data out of China. The Chinese government reported accelerated economic growth in the fourth quarter and annual growth of 2.3% last year. That makes China the world’s only major economy (so far) to have grown, rather than contracted in a pandemic-riddled 2020.

Vaccine developments remain a silver lining in what is still a steep hill to climb in the world’s battle against COVID-19. A single-dose vaccine developed by Johnson & Johnson is expected to soon earn approval from the US Food and Drug Administration (FDA), which would add to the supply of vaccines available for distribution.

The first piece of legislation introduced by the Biden administration was a proposed $1.9 trillion stimulus package that includes another round of direct payments to Americans, plus more money for COVID-19 testing and vaccine distribution. It would be the third major round of stimulus from the US government. The first (CARES Act) was passed in late March 2020. The second was agreed to in late December. Republicans have so far preferred a more modest aid package, but the Democrats likely have the votes to pass Biden’s plan even without Republican support.  

10-year Treasury yields rose above 1% in January for the first time in 10 months. The number climbed as high as 1.19% on January 12 before finishing the month at 1.09%.

Oil continued to grind higher, boosting Energy stocks along the way. West Texas Intermediate Crude increased an additional 7.6% in January and closed the month trading at $52.20 per barrel. Oil prices have shot 46% higher in the last three months combined. Gold prices drifted lower, falling 3.2%.

 

 

 

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: January 4, 2021

December Market Recap

January 4, 2021

Take a deep breath and allow yourself a smile. You survived 2020.

Congress finally gave us the stimulus markets had long been expecting, and a steady dose of positive vaccine developments helped fuel stock prices to new highs. While those realities might seem inevitable in hindsight, they represent significant milestones nonetheless in this fight to outlast a global pandemic.

The Dow Jones Industrial Average, S&P 500, and NASDAQ all gained more than 3% in December. In normal times, we might describe this as a particularly strong month. In 2020, it seems a rather benign conclusion to a most unusual year. Still, gains are to be celebrated and December provided a fitting end to an incredible 9-month surge for stocks.

Every one of the 11 sectors in the S&P 500 climbed higher last month. Financials (+6.3%) and Energy (+4.4%) were among the top performers for the second month in a row. Technology (+5.7%) also capped off an incredibly profitable year with a flourish. Utilities (+0.7%) and Industrials (+1.2%) provided more meager returns.

Index December 2020 Full Year 2020
Dow +3.87% +7.25%
S&P 500 +3.71% +16.26%
NASDAQ +5.65% +43.64%

No matter what happens in the year ahead, we can marvel at the resiliency the stock market displayed in 2020. Perhaps the ultimate silver lining to a year with so many negatives was the strong rebound in equity prices from their March lows.

That strength persisted through year-end. Many large-cap stocks moved to record highs in the first few days of December. By the final week of 2020, all the major US equity indices reached record highs.

Calendar year returns for the Dow and S&P 500 may appear modest, but their meteoric rise since the bear market bottom (yes, there really was a bear market) better gauges the market’s rapid reversal of fortune. From March 23 through year-end, the Dow rose 68% and the S&P 71%.

The NASDAQ, meanwhile, is in another stratosphere. The tech-heavy index’s annual performance nearly tripled the S&P 500, and its 94% gain off the pandemic low is even more eye-opening.

It’s well-documented that technology stocks were disproportionately responsible for the stock market’s recovery. Here are a couple datapoints to drive that point home. Three of the largest companies by market capitalization – Apple, Amazon, and Microsoft – generated 53% of the S&P 500’s total return in 2020. The Technology sector as a whole accounted for 69% of the S&P’s calendar year gains.

Although small-cap stocks lagged for most of the year, a furious fourth-quarter rally eliminated that gap by year’s end. The Russell 2000 climbed more than 30% in the final three months of 2020, including an 8.5% gain in December. It’s the best quarterly performance for the Russell since 1979, when data began being collected.

The most recent of those gains were made possible by Congress finally agreeing to a second round of fiscal stimulus on December 21. The legislation will bring roughly $900 billion of aid to American families and small businesses, including $600 checks for individuals who earned less than $75,000 in 2019 (and $1,200 for joint-filing couples who earned less than $150,000). The income restrictions are less generous than the first round of stimulus checks generated by the CARES Act in late March.

The long-awaited arrival of a safe COVID-19 vaccine also boosted investor sentiment last month. The US Food and Drug Administration (FDA) granted its first emergency use authorization to Pfizer-BioNTech on December 11. A second vaccine developed by Moderna received the same FDA authorization for distribution a week later.

International equities outperformed in December. The MSCI EAFE index rose 5%, while the MSCI Emerging Markets benchmark gained 7.1%. The ongoing Brexit saga seems as close as ever to a conclusion now that diplomats from the UK and European Union agreed to the terms of a new trade deal on December 24.

Interest rates nudged higher with the 10-year US Treasury yield nearly touching 1% for the first time since early March. They finished the year at 0.92%, up slightly compared to a month earlier (0.84%).

Oil prices continued to rise, helping to ignite strong performance among Energy stocks the last two months. West Texas Intermediate Crude gained another 6.8% in December and traded above $49 per barrel mid-month. It last hit $50 per barrel in February.

Gold prices also enjoyed a strong finish to the year, increasing 7% last month.

 

 

 

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: December 1, 2020

November Market Recap

December 1, 2020

So much for all the concern that a contested election would harm the stock market. Despite a change in Presidential leadership and the legal disputes that followed, US stocks just completed their best single month in 33 years!

Each of the three major indices gained more than 10% in November, shrugging off unfounded claims of election fraud and a steady rise in COVID-19 cases. The Dow Jones Industrial Average surpassed 30,000 for the first time. The NASDAQ again topped 12,000. Both of them, along with the S&P 500, finished the month near all-time highs.

While November began with our country’s focus squarely on the election, it ended with a wave of positive momentum created by encouraging vaccine developments. The market after all is relentlessly forward-looking, and a finish line finally appears in sight in the race to cure COVID.

All 11 sectors in the S&P 500 booked gains in November. Energy (+28%) and Financials (+16.9%) finally enjoyed a month in the sun, although they remain the two worst-performing sectors year-to-date. Industrials (+16%) were also among the best performers. Utilities (+0.7%) and Real Estate (+7%) were the relative laggards.

Index November 2020 YTD 2020
Dow +11.84% +3.86%
S&P 500 +10.75% +12.10%
NASDAQ +11.80% +35.96%

The other race — the one for the White House — ended with Joe Biden unseating Donald Trump, although the historically high number of mail-in ballots did result in the outcome being delayed a few days longer than usual. Significantly, Republicans appear likely to maintain a narrow majority in the Senate, although that will remain uncertain until the conclusion of two Senate runoff elections in Georgia on January 5.

As they often do, financial markets surged in the days following the election. The S&P popped more than 5% in the four trading days immediately after Election Day. Consider it an endorsement of the probability that political power in Washington will remain split. Should Democrats pull an unlikely upset in the Georgia runoffs and turn the Senate blue as well, that could lead markets to recalibrate.

The political theater suddenly feels like a sideshow, however, after news that multiple vaccines blew away medical expectations in their most recent clinical trials. Biotech company Moderna’s vaccine had a 94% efficacy rate in a trial involving 30,000 people. Only 11 people who received two doses of the vaccine developed COVID-19 symptoms compared to 185 people in the placebo group.

The Moderna vaccine was also 100% effective at eliminating “severe disease.” The company has already applied for emergency use authorization from the US Food and Drug Administration. Pfizer and BioNTech are other companies that have developed comparable vaccines and reported similarly impressive results.

Stocks got an extra jolt the week of Thanksgiving when the Trump administration begrudgingly began the peaceful transition of power toward a Biden presidency. On the same day, Biden named former Federal Reserve Chair Janet Yellen as his presumptive US Treasury Secretary.

Third-quarter earnings season concluded with S&P 500 earnings declining 6% cumulatively from a year earlier. Three industries in particular — Oil & Gas, Airlines, and Hotels/Restaurants — dragged down the overall number. Excluding those three components of the US economy, S&P 500 earnings grew more than 4% year-over-year.

As vaccine progress spurred hopes of a more broad-based economic recovery, several categories that have lagged year-to-date outperformed in November. Small-cap stocks exploded higher with the Russell 2000 index gaining 18.3%. Non-US Developed equities rose 14.3%. Emerging Markets equities increased only 9%.

Official numbers reported by the US Commerce Department confirmed that American GDP grew at an annualized pace of 33.1% in the third quarter. Consensus growth estimates for the fourth quarter, however, are below 5% annualized. Economic forecasts for the first quarter of 2021, meanwhile, have been revised lower following the latest spike in COVID-19 cases and another round of mitigation measures.

Interest rates have remained stubbornly steady, a modest surprise given that a sharp increase in stock prices would typically send rates higher as well. The 10-year US Treasury bond finished November yielding 0.84%, two basis points lower than a month earlier (0.86%).

Unemployment claims rose in each of the last two weeks, the first instance of back-to-back weekly increases since July. It’s a sign the recovery in the US labor market is slowing and remains vulnerable.

Oil prices climbed every week in November and rose to their highest level in eight months. West Texas Intermediate Crude finished the month trading just above $45 per barrel.

 

 

 

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: 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.

 

 

 

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