Quarterly Market Update 9.30.2020

Scott Campbell |

The U.S. stock market was up an impressive 9.24% for the third quarter, which is somewhat surprising given the market correction that occurred in September. 

The correction was due mostly to fears that stock prices have recovered too much too quickly.  It was a standard market pullback, and not out of place considering the amazing recovery that has occurred since March.  These corrections are the price one pays to invest in stocks.  Although the volatility has become more intense the past few years. 

Speaking of volatility, we should expect volatility around the election, especially if the outcome is not readily known.  Elections, historically, are generally good for the stock market because the results are normally a split government which means not much will get done.  The market likes it when government does not make major changes.  There are, however, fears that a “blue wave” (democrat house, senate and presidency) will the cause the market to drop because the corporate tax reductions and easing of regulations which boosted the market will be rolled back.

Whatever volatility comes out of the election, it will fade.  Following the election, we will be well into the fourth quarter which is the best quarter historically.  The normal fourth quarter increase in economic growth will be boosted by more of the economy re-opening.  Apple is debuting the new 5G iPhone next week.  5G is going to increase economic growth for both businesses and individuals.

Advances in the therapies to deal with Covid are amazing.  The latest therapy stops the spread of the Covid virus in those who have contracted it, prevents asymptomatic patients from becoming symptomatic and even stops people from contracting the virus altogether.  A vaccine should be available to the groups that need it most late this year and available for widespread distribution early next year.  A vaccine will not mean the end of Covid, but it will greatly reduce the chance of spikes, which threaten to overwhelm our health care system and cause local and state governments to shut down portions of the economy.

Today the market dropped on the news President Trump cancelled the stimulus talks.  That means the stimulus will be passed after the election and the market will respond accordingly. 

Key Below are the key economic

U.S. Employment

Employment gains slowed in September.  The unemployment rate drops to 7.9% from 8.4% in August.  The U.S. has now gained back 54% of the jobs lost in March and April. 

U.S. ISM Services Index

Services sector activity defies expectations and improves in September as activity in the service sector continues to recover.  Improved employment emerged into expansionary territory with furloughed workers being called back and hiring increasing to meet increased demand.  The recovery is expected to continue but would be helped by a stimulus package.

U.S. ISM Manufacturing Index

Manufacturing sector expanded in September, with the overall economy registering a fifth consecutive month of growth.  The expansion was seen across the board but powered by new orders and production.

U.S. Auto Sales

Sales of U.S. autos recorded its fifth straight month of gains.  Relative to February pre-Covid levels, September sales were lower by just 2.5%.

U.S. Personal Income & Spending

Spending data continues to show durable goods spending is slowing while services spending improved.  A pullback in income was due to the expiration in unemployment benefits.

U.S. Existing Home Sales

August was a solid month, but the pace of gains is slowing. 

U.S. Housing Starts

August was a solid month for single family homes while multi-family starts weakened.  Homebuilders appear to fulfilling the demand.

U.S. International Trade:

Both exports and imports continue to improve, but a slower pace than the last couple of months.  Despite the improvement, exports and imports will be below last year’s trade.  Recovery over the next few months will be dictated by State mandated closures due to Covid.


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