This Week's Market Moves | October 12, 2020
U.S. equities delivered another solid week of gains, with the S&P 500 Index climbing to its highest level since the beginning of September. Speculation of a Democratic sweep in the upcoming election and hopes of an even bigger stimulus package is driving investor optimism. Here are some other insights on the markets and economy from this past week:
Stock prices fluctuated with headline news on the on-again, off-again stimulus negotiations. Despite some volatility, stocks managed to sustain steady gains last week, with the S&P 500 Index finishing the week up 3.9%. Fears of a contested election are fading now that polls are leaning decisively in favor of a Democratic sweep in November, which could lead to an even bigger stimulus package early next year.
Small-cap stocks have notably outperformed the Dow Jones, S&P 500 and NASDAQ Indices in recent weeks. Small-cap stocks are typically more sensitive to economic fluctuations than large-cap stocks, doing well when the economy strengthens and tumbling during recessions. The recent move suggests the market is counting on another relief package to help boost the U.S. economy, which would be a positive sign for the broader market.
Bond volatility spiked to a four-month high after hitting an all-time low the previous week. The move coincided with a sharp jump in longer-maturity Treasury yields, with the benchmark 10-year Treasury yield climbing 10 basis points to 0.79% and the 30-year Treasury yields rising 10 basis points to 1.58%. This is the highest level of Treasury yields since June.
Oil prices climbed nearly 10%, as another hurricane threatened to batter the U.S. Gulf Coast this past weekend. This was the 10th tropical storm or hurricane to make U.S. landfall this year, breaking a record dating back to 1916. Nearly all oil production in the region was shut down out of precaution. This temporary supply shock caused oil prices to rise back above $40 a barrel, although the surge is not expected to be sustained.
The minutes from the Federal Reserve’s September monetary policy meeting were released last week. Policymakers noted that the recovery had been faster than expected, but uncertainty over the containment of the virus and the absence of new stimulus still pose downside risks to the economic outlook. Fed officials were also divided on how best to communicate the likely path for monetary policy under their new policy framework.
Over seven months into the pandemic, there are still a ton of people losing jobs. While the trend has been steadily declining, nearly 1.3 million Americans applied for first time state and federal emergency this past week. There are also over 25 million Americans currently receiving some form of unemployment aid from the government right now.
Stock prices reacted to both positive and negative headlines on the stimulus talks last week. While negotiations between the House and Senate leaders have not produced an agreement, the market remains hopeful that there will another relief package. However, the market is now expecting it to come after the election. Amidst all the drama, Fed Chairman Powell warned Congress that more support was needed to help households and businesses who are still reeling from the coronavirus pandemic.
Rising coronavirus infections have forced many countries to tighten restrictions to curb the spread of the virus again. While avoiding another lockdown, local leaders are beginning to implement lighter restrictions, such as travel bans and limitations on social activities, to slow the spread. New York City’s Mayor de Blasio has called for schools and non-essential businesses in some neighborhoods to close in order to halt flare-ups.
Indices: Core Bond: Bloomberg Barclays U.S. Aggregate Index, High Yield: ICE BofA US High Yield, Large Value: Russell 1000 Value Index, Large Blend: S&P 500 Index, Large Growth: Russell 1000 Growth, Emerging Markets, MSCI EM NR USD, Foreign Equities: MSCI ACWI Ex USA NR USD, REITs: FTSE NAREIT All Equity, Small Blend: Russell 2000
Should you have additional questions, please contact your Cammack Retirement Group consultant or info@cammack retirement.com. Note that this article was published on October 12, 2020. Data represented is as of the publication date. The information contained herein has been obtained from sources that are believed to be reliable. However, Cammack Retirement Group does not independently verify the accuracy of this information.
Note: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Opinions expressed are those of the author, and do not necessarily represent the opinions of Cammack Retirement Group.
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