Todd’s Take on the Market
It doesn’t feel like it, but the S&P 500 just posted its first week of gains since August, gaining 1.54%, while the Dow and NASDAQ also posted gains of 1.88% and 1.50%, respectively.
Although stocks did rally to close out the week, it was the first losing month since March and now the S&P 500 is 5% off the highs of the first of September and the NASDAQ is 6% off. We have to ask what is the catalysts for the next leg higher.
Narratives used to explain market moves have come down to this: if markets are down, it’s due to stimulus pessimism, rising COVID cases and/or a fading economic recovery; if markets are up, it’s due to stimulus optimism, COVID vaccine hopes and/or a stronger economic recovery.
It was a ‘Nightmare on Elm Street’ month of September for tech investors—the NASDAQ, which gets about 40% of its value from just a handful of technology stocks, lost more than 5% in September. At the same time, the S&P 500 dropped nearly 4%. The Dow Jones Industrial Average also lost more than 2% since September 1.
Turning to the economy, a flurry of corporate layoffs in recent days has offered traders and investors the latest reminder that the economic recovery continues to wane, and many of these layoffs won’t be counted in time to be reflected in the pre-election day job numbers. Take a look at some of these numbers of layoffs:
Disney—28,000, Allstate—4000, Shell—9000, Goldman—400, Airlines—between 30,000 and 50,000 and Regal Cinemas—20,000.
To top that off, we saw another 837,000 unemployment claims filed last week, down a bit. Plus 650,000 Pandemic Unemployment Assistance. 26.5 million are now on some kind of unemployment. Half a million more than the week before. The jobs crisis isn’t abating. It’s stuck. Getting worse for many.
In the latest jobs report, we added 661,000 payrolls which were not quite the expected (800,000), but the unemployment rate fell to 7.9%. Still not the kind of numbers we want to see at this point. This is why another stimulus bill is so important. The market doesn’t seem to mind the jobs miss—probably thinks it will push Congress to get moving on that stimulus bill.
So, with less than a month until the elections, we will get very little economic data but we will be kicking off earning season any day with the big banks being the first to report. With interest rates “stuck in the mud” it will be interesting what their take is. October generally kicks off a good time for the markets, but with the elections upon us, it is anyone’s guess. I would say stay tuned and we will keep you posted…
Todd Day, MBA
Portfolio Manager
Horizon Financial Services, LLC
