This Week's Market Moves | October 26, 2020

The major stock markets ended last week marginally lower, as the stimulus stalemate, rising coronavirus cases, and uncertainty ahead of the presidential election weighed on sentiment. Below are some other insights on the markets and economy from this past week:

Markets ended the week modestly lower, as investors grappled with the on-again, off-again stimulus negotiations, a slew of better-than-expected earnings reports, and a surge in new virus cases. Following three consecutive weeks of advances, the S&P 500 Index closed down 0.5%, the Dow Jones lost 0.9% and the tech-heavy NASDAQ declined 1.1% for the week. The best performing sectors were utilities and communication services, while the worst performers were real estate and information technology.

Technological innovations are fundamentally transforming the economy. Years ago, the most valuable companies were those with tangible assets, which include physical items such as vehicles, equipment, buildings, or inventory. However, the growth of the digital economy has seen intangible assets surge in recent years. Intangible assets are those that are non-physical in nature, such as goodwill, brand recognition, customer data or intellectual property, like a patent or trademark. Today, an astonishing 84% of the S&P 500’s market value is based on intangible assets, a dramatic shift from 20 years ago.

Longer-maturity yields have moved gradually higher in recent weeks, with the 10- and 30-year Treasuries climbing to their highest level over four months. The 10-year Treasury ended the week up 9 basis points to 0.85% and the 30-year Treasury rose 12 basis points to 1.64%. While Congress has been unable to reach an agreement on another round of fiscal relief, the bond market seems to be factoring in a substantial package, regardless of who wins the election.

There continues to be huge demand for ESG bonds. The European Union’s (EU) first joint debt offering of 10-year and 20-year social bonds was a blockbuster success, with both tranches well over-subscribed. The proceeds for the EU’s social bonds are intended to finance a job support program for its member states that have been devastated by the pandemic.

The housing sector has been one of the bright spots in the pandemic-ravaged economy. The combination of low interest rates, surging demand for more space, and the acceptance of remote work have helped the housing market climb to a record high. While it may sound counterintuitive, the median sales price of existing homes has actually surged during the recession.

The number of Americans seeking first-time unemployment benefits unexpectedly fell to 787,000 this past week. However, an additional 345,000 filed for Pandemic Unemployment Assistance. Continuing claims, which report those who are already receiving state benefits, fell to 8.37 million. While the data is better than expected, there are still 23.2 million Americans who are relying on some form of state or federal aid to make ends meet.

Europe is in the middle of its second wave, with leaders across the region re-deploying curfews and new lockdowns to curb the spread. Virus cases are also climbing across the U.S. at an alarming rate and hospitalizations have increased. The news is troublesome, particularly now that deaths are increasing again in the U.S. However, there are some positive developments on COVID-19 treatment therapies. The FDA just approved Gilead Sciences’ remdesivir for treating patients infected with the virus.

With the election just days away, Congress has been unable to reach an agreement on another fiscal stimulus package. While the White House has signaled its willingness to increase the size of the package, a sticking point for the House Democrats, it does not appear that Senate Republicans are on board. Meanwhile, the expiration of many of the financial safety net programs provided to families, individuals, and businesses is rapidly approaching. If a deal is not reached soon, a crucial lifeline to American workers and the U.S. economy, at large, may be taken away.

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 Note that this article was published on October 26, 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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