Weekly Market Commentary

October 5, 2020

 

The Markets

Last week, the third quarter of 2020 came to an end – and the fourth quarter delivered a doozy of an October surprise.

President Trump has the Coronavirus

On Friday Americans awoke to the news President Trump had contracted COVID-19. Financial markets responded with relative equanimity. After a brief sell-off on Friday, major U.S. indices finished the week, and the third quarter, higher.

Market Enthusiasm Cooled in September

U.S. stock markets moved higher in July and August. Then, in early September, investors became skittish and major U.S. indices recorded losses for several weeks. The surge of uncertainty may have resulted from changing vaccine expectations, concerns about earnings, fears of a disputed election, and lack of new stimulus.

The Federal Reserve Committed to Low Rates for a Long Time

The Federal Reserve’s changing policies may have had an influence on markets, as well. The Fed intends to keep interest rates near zero for the foreseeable future.

Yields on 10-year U.S. Treasuries moved in a narrow range during the quarter, finishing near where they started.

Stimulus Talks Resumed Last Week

Treasury yields rose and stock markets perked last week when Congress resumed stimulus talks. Investors are hoping for $1.3 to $1.5 trillion in new stimulus, according to Kiplinger’s.

Additional stimulus measures were expected early in the third quarter after the CARES Act provisions ran dry in July. However, better-than-expected economic data and a reluctance to increase the burgeoning budget deficit made some in Congress adopt a wait-and-see approach.

The Pace of Recovery May Be Slowing

Throughout the third quarter, employment improved steadily. In July it was 10.2 percent. By September, it had fallen to 7.9 percent. While continuous improvement is important, the pace of job creation slowed last month.

Economic Growth Improved During the Third Quarter

During the second quarter (April through June), the U.S. economy shrank by about a third (-31.7 percent). Data for third-quarter economic growth is expected to show a significant improvement. The Atlanta Federal Reserve’s estimates third-quarter growth could be as high as 34.6 percent.

 

The Very Best Wrong Test Answers

Almost everyone has come across a test question they couldn’t answer. Some ingenious souls provide their teachers with some humor instead. British author Richard Benson asked teachers to share their favorite wrong test answers, and he shared a few with Business Insider:

Q: When did the founding fathers draft the Constitution?

A: It was a second-round pick, right after LeBron James.

Q: Describe what is meant by “forgetting.”

A: I can’t remember.

Q: What is nitrate?

A: It is much cheaper than the day rate.

Q: Upon ascending to the throne, the first thing Queen Elizabeth II did was to…

A: Sit down.

Q: Where was the Declaration of Independence signed?

A: At the bottom.

 

Focus On The Positive

“You pay a very high price for a cheery consensus. It won’t be the economy that will do in investors; it will be the investors themselves. Uncertainty is actually the friend of the buyer of long-term values.”

Warren Buffett, Investor and philanthropist

 

Best regards,

Bill Spalding