This Week's Market Moves | September 14, 2020
Investors grapple with another week of market turbulence, as the major stock indices posted losses of 1.6% to 4.1% last week. On a year-to-date basis, the S&P 500 Index has advanced 4.8%. Here are some additional insights on the market and economy from this past week:
Investors continue to grapple with the recent tumble in stock prices, particularly as the tech-heavy Nasdaq entered correction territory in just three days. A market correction is defined as a decline that is greater than 10%, but less than 20%. The other major indices also traded lower on the week, but their declines were less pronounced. While the price action is concerning, market strategists seem more inclined to believe that the latest pullback is a long overdue correction after a five-month blistering rally, rather than the start of a larger sell-off that has further to go.
Mortgage rates hit another new all-time low last week, with the average 30-year fixed rate mortgage falling to 2.86%. This is the lowest 30-year fixed rate mortgage in Freddie Mac’s survey history, which dates back to 1971. A year ago, the average rate was 3.56%. Falling mortgage rates continue to boost refinancing activity and support the housing market, despite eroding affordability.
The VIX Index, widely known as a fear gauge for the market, is climbing again, closing last week at 26.9. A higher number signifies investors are expecting greater uncertainty or risk, and vice versa. While the level is elevated, it remains far below the 83 level it hit in mid-March, as stock markets around the world collapsed when the pandemic swept across the globe.
The price of oil has tumbled to its lowest level in nearly three months, as concerns over a stalling recovery, a decline in seasonal demand, and planned production expansions are weighing on sentiment. Oil prices have slid nearly 12.4% since the end of August to $37.3 per barrel, its weakest level in three months. The huge slide in the price of oil since the beginning of the year is also weighing on the S&P 500 energy sector, which has declined 44.3% this year.
Six months into the pandemic, all the weekly claims measures remain stubbornly elevated. This week, first time filings for unemployment held steady at 884,000, slightly higher than expected. Continuing claims, by those who are collecting benefits, edged higher to 13.4 million. The total number of Americans receiving unemployment benefits through all state and federal programs, which includes gig workers, self-employed, and those who do not qualify for state benefits rose to 29.6 million.
U.S. consumer prices edged higher in August to 1.3% on an annualized basis. The larger than expected increase was mostly due to higher used car and truck prices. Increases in gasoline prices, food away from home, and apparel also contributed. Excluding the volatile food and energy components, core inflation rose 1.7% over the last year.
Investors are losing hope that Congress will reach a deal on another stimulus package, as our elected leaders remain far apart on the size and scope of the relief needed. House Democrats remain steadfast on their wide-ranging $2.2 trillion proposal, while Senate Republicans are backing a slimmed down $500 billion plan focusing solely on school aid, jobless benefits, and help for small businesses. While Congress plays politics in the weeks leading up to the election, consumers and businesses are left dealing with the lingering economic fallout of the coronavirus pandemic.
With less than two months to go before the Presidential election, it is not surprising that volatility has begun to creep back into the market. With the polls showing the race tightening, especially in the swing states, and the likelihood of a contested election regardless of which party wins the race on November 3, markets are beginning to price in a more uncertain environment in the weeks ahead.
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 September 14, 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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