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Hope all is well with you and your family. Last week marked the 11th time this year that the S&P 500 has closed more than 2% lower than where it started the week. The S&P 500 fell almost 6%, it was the worst weekly decline since March 20, and the sell-off was largely driven by news that daily coronavirus cases have hit new record highs, and by less certainty that we will see another round of fiscal stimulus this year. Notably, the technology sector, which has been a leader for much of this bear-market rally, was down 6.5%, making it one of the leaders in the decline this week. Some good news was the strong third-quarter GDP growth, a labor market that is continuing to recover, and consumer spending that is continuing to exceed expectations. I have broken down this week's commentary by hit singles from the Doors.
Riders On The Storm
The markets are experiencing a perfect storm of volatility. With days left before the U.S. election, a trifecta of worries around the political outcome, the path of the virus, and the lack of progress on another fiscal package weighed on stocks. Volatility jumped 40% from the prior weeks' level . The spike in volatility does not signal a 180-degree change in the long-term outlook for stocks, but rather reflects some nervousness around uncertainties that are likely to result in a slower, bumpier path ahead. 
Love Me Two Times
Election uncertainty persists. Will the American people love the President two times? The stock market hates uncertainty, and the presidential election poses a unique type of uncertainty in that it has a repeatable calendar-based frequency. The current political environment feels unique considering the growing partisan polarization, the pandemic and the economic backdrop. To the market the uniqueness of the election cycle matters not. Uncertainty drives volatility, and we have the prospect of a delayed outcome and claims of victory on both sides. Remember no matter what side of the political fence you're on it’s far too soon to know how close this year’s race will be. Delayed results will cause swings in the market. Not knowing who wins before midnight on Election night doesn’t mean something is wrong or that anything nefarious is taking place. It may mean only that the race is close, or that election officials are taking more time than our impatient minds might like to count the boom in advance votes. 
Break On Through
You might be tempted to try to run or try to hide but the right advice is to break on through to the other side of this election. Continue to hold your stocks through what will certainly be a bumpy couple of weeks ahead. Knee-jerk reactions are common but not necessarily smart for long term money. Since 1932 there have been 22 U.S. presidential elections. In 14 of those instances (64% of the time), stocks declined the day after the election, likely reflecting anxiety about the future because a large section of the population is unhappy with the outcome. Most of the post-election day returns have ranged between -1.5% to 0%, but there have been a few sizable declines, some of them taking place in recent history. Stocks initially dipped 5.3% after Obama's 2008 victory and 2.4% after his 2012 win. Stocks declined 4% in the early hours after Trump’s victory, as well. Historically, these post-election dips proved misleading and short-lived, with stocks quickly reversing course. Fundamental conditions set the tone for market outcomes - outside of the one-day post-election market reaction, which is inconsequential for long-term investors, stocks have risen one year after the presidential election in 16 out of the last 22 presidential elections (73% of the time). Over longer-time periods, fundamental factors such as economic growth, corporate profits and interest rate conditions are the more powerful and lasting determinant of performance. You don't need to go back too far into annals of history to find powerful examples. Since 1980 there have only been two instances where stocks produced negative returns one month, two months and six months following an election. They took place in 2000 (Republican president) and 2008 (Democrat president) with both declines being largely attributed to asset-price bubbles rather than politics. On the flip side, stocks recorded strong six-month and one-year returns following the 2012 (Democrat president) and 2016 (Republican president) elections, driven by improving economic data and rising earnings. This time around, while the range of outcomes is wide, the backdrop is positive, there is an improving labor market, record corporate profitability in the largest companies, and low interest rates. 
Touch Me
Touching is happening again and places throughout the world and the country seem like they are not afraid. The virus is spreading the resurgence of COVID-19 cases is a headwind that threatens to slow, but not derail, the recovery. The path of the virus poses unprecedented uncertainty to the economic outlook. Medical solutions (therapeutics or a vaccine) are likely necessary for a full return to normalcy and economic recovery. However, we know a lot more now about the virus and I don’t feel the recent uptick in cases will lead to a repeat of the conditions witnessed in the early stage of the pandemic. Economic damage from any new restrictions is likely to be contained, last week brought the news of renewed restrictions and lockdowns in France and Germany in order to deal with the pressure of mounting infections. Nonessential businesses like restaurants, bars, gyms and theaters will close for one month, but unlike the March and April lockdowns, schools and factories will remain open. In the US there is less of an appetite for a shutdown although I won't be shocked if we see more targeted and localized closures if the current virus trends continue. I am here to help at any time. If you would like to schedule a phone/web conference appointment, I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment.
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Hope all is well with you and your family. A three-week string of gains ended as the major stock indexes slipped around 1% entering the busiest stretch of what’s so far been a strong quarterly earnings season. Stocks couldn’t recover from a Monday decline fueled by a setback in congressional negotiations over a coronavirus relief package. The markets remain volatile and look to open down this morning. Here's what you need to know from last week broken down by Dirty Harry quotes.
You've got to ask yourself a question: 'do I feel lucky?
Treasury yields surged. Luck seems to be running out on the bond market as rates are finally starting to move higher. The yield of the 10-year U.S. Treasury bond climbed on Friday for a seventh straight trading day to an intraday peak of 0.87%, the highest level in more than four months. As recently as early August, the benchmark 10-year yield was as low as 0.52%. As I have stated numerous times before I am not a believer in bonds at this time. I think we will start to see bond prices fall as the trend interest rates will be to move higher. Borrowing money (refinancing mortgages) on the other hand at these low rates does still make sense. Go ahead. Make my day. Congress refuses to make the market's day. It was another on-again, off-again week on prospects for further congressional aid to deal with the coronavirus’ economic impact. The uncertainty extended into Friday, when a top White House economist said talks in Congress appeared to have stalled, sparking concern that another round of aid may not be approved before the November 3 election. Even without a relief package the economy appears to be regaining strength. A monthly indicator of U.S. economic activity signaled the fastest rate of expansion in 20 months for both the services and manufacturing segments of the economy. However, the survey data from the IHS Markit Purchasing Managers’ Index also showed that companies acted cautiously when it comes to spending. Evidence? What the hell do you call that? Evidence of an economic recovery worldwide is emerging. China the first economy to shut down and the first to reopen reported that its economy grew at a 4.9% annual rate in the third quarter, extending its recovery from the pandemic. The quarterly gain for the world’s second-largest economy was faster than the 3.2% rate of increase in the second quarter, when other major economies were suffering steep GDP declines. Could the U.S. report similar growth? This coming Thursday’s release of the government’s initial estimate of third-quarter U.S. economic growth is expected to be the most closely watched report of the week, as it could produce a record-breaking growth figure for a single quarter. In this year’s second quarter, GDP plunged 31.4% amid the pandemic. For the third quarter, economists are expecting a sharp reversal, with most forecasting growth of around 30.0%. I am here to help at any time. If you would like to schedule a phone/web conference appointment, I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment.
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Hope all is well with you and your families. The major U.S. stock indexes climbed for the third week in a row, but at a far slower pace than in the previous two weeks, as the indexes’ weekly gains were less than 1%. Earnings season began with several of the major U.S. banks reporting that their third-quarter results were boosted by strong trading and investment banking revenue. Overall, companies across the S&P 500 are expected to report a roughly 20% decline in earnings, according to FactSet. I have chosen to break down this week's market news using quotes from the movie The Big Lebowski.
"Well, sir, it’s this rug I have, it really tied the room together."-The Dude
Americans are shopping again for rugs, clothes and many other items. U.S. retail sales rose by a better-than-expected 1.9% in September. The latest gain marks the fifth consecutive monthly increase—a string that has returned retail sales to pre-pandemic levels and then some. 
"Are you employed sir?"-The Big Lebowski
The number of people filing new applications for unemployment benefits has remained stubbornly high, despite recent months’ progress in reducing the U.S. unemployment rate. The latest weekly report showed that unemployment claims climbed to a higher-than-expected 898,000, the most since late August. 
"You see what happens! This is what happens when.."-Walter Sobchak
Globally, we will see what happens when you can't agree on economic decisions during a pandemic. In the UK we are on the brink of Brexit. Prime Minister Boris Johnson said on Friday that the United Kingdom will prepare to leave the European Union’s single market at year end without a Brexit trade agreement in place. Continued uncertainty over terms of the U.K divorce from the EU weighed on European stocks throughout the week, as did rising coronavirus cases. Here in the US, politicians are unable to put their differences aside as prospects diminish for virus related economic relief. The next round of stimulus remained elusive, as the White House and leaders of the House and Senate continued to disagree over details. I continue to believe that the uncertainty will lead to volatility in the short term but longer term stocks will continue to offer the most growth opportunity long term. I am here to help at any time. If you would like to schedule a phone/web conference appointment, I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment.
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Hope all is well with you and your family. The major U.S. stock indexes each rose more than 3%, and the S&P 500 posted its best weekly result in three months. The NASDAQ Composite’s nearly 5% rise was the biggest gain among the indexes, leaving it just 4% shy of the record high it set in early September. Here's a quick recap of the week that was.
Investing In The Unknown
As third-quarter earnings reports start to come in, an unusually large number of companies remain reluctant to offer financial guidance for their full-year 2020 and 2021 results, owing largely to uncertainty from the pandemic. Globally, the pace of COVID-19 cases continued to rise, weighing on prospects for economic growth. As of Friday, 147 companies in the S&P 500 that have traditionally issued annual earnings guidance had done so, compared with 138 that hadn’t, according to FactSet. 
Coronavirus Relief Coming??
Markets dropped initially on news the President was linking the aid package to the election. Market sentiment was later boosted by signs that White House officials and congressional leaders were bridging differences on measures to help airlines, small businesses, and households. These measures are unlikely to take effect before the election, but the resumption of coronavirus relief talks fueled optimism. 
Fed Chair's Plea
U.S. Federal Reserve Chairman Jerome Powell issued a warning to Congress and the White House, saying the risks of not doing enough to provide further coronavirus-related economic relief are greater than the risks of doing too much. Powell said that the economic recovery is still at an early stage and the current expansion is “far from complete.” I am here to help at any time. If you would like to schedule a phone/web conference appointment, I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment.
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Hope all is well with you and your family. The major U.S. stock indexes rose this week. The gain snapping a string of four consecutive weekly declines. At Friday’s close, the S&P 500 was down 6% from its early September record high, the NASDAQ was down 8%, and the Dow was 4% lower. Last month’s 3.9% decline in the S&P 500 snapped a string of five monthly gains in a row.
Job Growth Slowing Although the U.S. economy added 661,000 jobs in September, the latest monthly employment report provided further evidence of a slowdown in the pace of the economic recovery and in the labor participation rate. Of the 22 million jobs lost in March and April, roughly half have since been recovered. Coronavirus Relief The U.S. House of Representatives on Thursday narrowly passed a Democratic bill that proposes a $2.2 trillion coronavirus relief package. However, the bill failed to win backing from House Republicans, and prospects in the Republican-led Senate remained uncertain. Markets remain optimistic that Congress will overcome their differences and pass a relief package. President Tests Positive President Donald Trump and First Lady Melania Trump after they tested positive for COVID-19, as well as several other high-profile politicians, thoughts and prayers go out to the first family and all those infected by this terrible virus. Global and U.S. stock markets fell modestly on Friday following the announcement of the positive tests. The stock market continues to hold up despite all the negative news this year. At the moment there is a lot of uncertainty about the direction of our economy and our country. This will lead to continued volatility in the short run but I remain positive on stocks longer term. I am here to help at any time. If you would like to schedule a phone/web conference appointment, I have included a link to my calendar below and you can self schedule. For those of you who prefer an in person meeting I am now scheduling in person meetings as well, please email me if you would prefer an in person appointment. https://booknow.appointment-plus.com/b8hh5y90/ |
Stephen Caruso
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STEPHEN CARUSO
President & Founder
Laurel Wealth Solutions
President & Founder
Laurel Wealth Solutions
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Licensed Insurance Professional.
Stephen Caruso is an Investment Advisor Representative offering investment advisory services through Belpointe Asset Management, LLC, 125 Greenwich Avenue, Greenwich, CT 06830 (“Belpointe"). Belpointe is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe Asset Management offers, or that or its personnel possess a particular level of skill, expertise or training. Insurance products are offered through Belpointe Insurance, LLC. Important disclosures related to Belpointe are available at http://www.belpointe.com. Additional information pertaining to Belpointe’s registration status, its business operations, services and fees and its current written disclosure statement is available on the SEC’s Investment Adviser public website at https://www.adviserinfo.sec.gov/.
AR-4241 | 18296-2018/12/11
Stephen Caruso is an Investment Advisor Representative offering investment advisory services through Belpointe Asset Management, LLC, 125 Greenwich Avenue, Greenwich, CT 06830 (“Belpointe"). Belpointe is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe Asset Management offers, or that or its personnel possess a particular level of skill, expertise or training. Insurance products are offered through Belpointe Insurance, LLC. Important disclosures related to Belpointe are available at http://www.belpointe.com. Additional information pertaining to Belpointe’s registration status, its business operations, services and fees and its current written disclosure statement is available on the SEC’s Investment Adviser public website at https://www.adviserinfo.sec.gov/.
AR-4241 | 18296-2018/12/11