October 1, 2020

The equity markets took a breather from their upward climb during the month of September with the Dow slipping back into negative territory for the year.  This has been the first down month since March.  As we enter the final quarter of the year and the final days of the election the markets will continue their choppiness.

The economy under COVID 19 remains the focus for many Americans, with lower income workers feeling the brunt of furloughs and layoffs.  Total nonfarm payroll employment rose by 1.4 million in August, and the unemployment rate fell to 8.4 percent, the U.S. Bureau of Labor Statistics reported in early September.  Investors also cheered better-than-expected jobs data as well as a record surge in pending home sales.  Although more people are returning to work and job growth has been encouraging, there are still many individuals who have little or no investments or savings to fall back on. 

Many people ask about the interplay between politics and the market.  Do politics drive the market, or is it the other way around?  The first thing to note is that stock returns are influenced by multiple factors, including business cycles, corporate profits, and globalization—to say nothing of unpredictable events like the 9/11 terrorist attacks and global pandemics.  The short answer is that if there is a balance of power between the three branches, stock prices are generally a function of growth, profitability, and financial health.  Those aspects drive the anticipated future earnings of various corporations and determine what buyers and sellers focus on when determining stock prices.

Congressional lawmakers and Trump administration negotiators have been attempting to reach a deal to pass another virus relief bill. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have been discussing a $2.2 trillion Democratic stimulus proposal.  Most economists and policy pundits are bracing for no new stimulus legislation to pass before the general election.

Year to date the S&P 500 and Nasdaq are both positive 4.09%, and 24.46 %, respectively, while the Dow is down 2.65%.  The 10-year Treasury is currently yielding 0.66%.

*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.  All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.