This Week's Market Moves | September 28, 2020

Equity markets capped off another volatile week, with the Dow finishing down 1.8%, the S&P 500 Index falling 0.6% and the NASDAQ up a modest 1.1%. Stocks have been under pressure from rising coronavirus cases and Congress’ inability to pass a stimulus package. Here are some other insights on the market and economy from this past week:

Despite a late-session rally into the close of business on Friday, the S&P 500 Index finished the week down 0.6% as political uncertainty, fading hopes of a new stimulus bill, and a sharp uptick in the number of coronavirus cases weighed on sentiment. The recent market correction has been broad based, with all eleven sectors of the S&P 500 declining this month.

While government bond yields have remained relatively steady, the riskier sectors of the credit market are starting to come under pressure. High-yield bond spreads have widened over 60 basis points since the beginning of September. The souring sentiment has caused retail investors to pull over $1 billion from the largest exchange-traded fund tracking junk debt, the iShares High Yield Corporate Bond Fund (HYG), this past week. This was the biggest single-day exit since the coronavirus-triggered sell-off in February.

The bad news keeps coming for bank stocks, both here in the U.S. and abroad. Shares of major banks worldwide fell sharply this week following allegations of suspicious money transfers from some of the largest players. This comes at a time when the banking sector has already been facing significant headwinds, such as ultra-low and negative interest rates, as well as the uncertainty of the pandemic and its impact on bank earnings. On a year-to-date basis, bank stocks have tanked well over 30%.

The DXY Index, which tracks the U.S. dollar’s performance versus six major currencies, has soared to its highest level since mid-July, as equity markets tumble and safe-haven demand for the greenback comes back into play amid the market volatility. Technical factors have also played an aspect in the dollar’s recent rebound, as speculative short positions are being unwound.

Fed Chairman Powell and Treasury Secretary Mnuchin addressed questions from the House Financial Services Committee on the state of the economy, what more can be done to support the recovery, and the troubled Main Street Lending Program. There were no surprises from Powell, who reiterated his call for more fiscal stimulus to support the economic recovery. While stimulus talks have stalled, Mnuchin pledged to work with Congress to support a targeted fiscal package to provide relief to American workers and businesses.

The number of first-time filers for unemployment benefits through the traditional state programs unexpectedly increased to 870,000, and another 630,000 filed for Pandemic Unemployment Assistance. This means there were about 1.5 million new claims filed for the week. However, other data shows a more promising trend. The continuing claims data, which reports those currently receiving benefits, declined to 12.6 million, and the total number claiming benefits through all unemployment programs, which includes several emergency programs, fell to 26 million.

The housing market is booming. The sale of existing homes in August climbed at a 10.5% annual pace, its highest level in over 14 years. New home sales are also skyrocketing, rising a whopping 43.2% over the last year. The combination of record-low mortgage rates, robust demand, and scarce inventory continue to underpin the housing market, despite the economic slowdown.

With less than six weeks to go before election day, Trump and Biden are already gearing up for a post-election challenge, regardless of who wins the election on November 3rd. The untimely death of Supreme Court Justice Ginsburg has added another element of risk that could spell trouble for the markets, particularly if there is a contested election battle that lands in the country’s highest court. With only eight justices left on the bench, a deadlocked court with a 4-4 split decision has suddenly become a real possibility.

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 September 28, 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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