October Market Update - Fiscal Support

S&P 500 lost 3.92% in September, finishing at 3,363.00. YTD through September 30, 2020 the S&P 500 is up 4.09%. Although the month was down, the S&P 500 gained 9.3% during Q3 2020. A snapshot of ETF asset class returns for the first three quarters of 2020 (please click on image to enlarge):

Now, let's review price, sentiment and valuation as we countdown to U.S. Election Day. Note: This will be my last monthly market update. Thank you for reading. 

September Market Update - Volatility Rising in a Stimulus Driven Market with a Presidential Election on the Horizon

 S&P 500 gained 7.01% in August, finishing at 3,500.31. YTD through August 31, 2020 the S&P 500 is up 8.34%. Volatility in markets increased for the last couple of weeks leading up to Labor Day weekend. When volatility rises in stocks, it often spreads to multiple asset classes. Investors frequently need to liquidate positions to calm their portfolio fluctuation. This situation can lead to temporary corrections in markets. How many market participants will need to press the sell button before the VIX is back below 26? Let's examine price, sentiment and valuation at the start of September.

Retirement Data: Fidelity Plan Balances Q2 2020

Please click on chart to enlarge
Source: Fidelity

From Fidelity's press release posted August 11, 2020:

• The average IRA balance was $111,500, a 13% increase from last quarter and slightly higher than the average balance of $110,400 a year ago. The average 401(k) balance increased to $104,400 in Q2, a 14% increase from Q1 but down 2% from a year ago. The average 403(b) account balance increased to $91,100, an increase of 17% from last quarter and up 3% from a year ago.

August Market Update - Is This the Point of Maximum Complacency?

The S&P 500 gained 5.51% in July ending at 3,271.12. YTD through July 31, the S&P 500 is up 1.25%. At the end of July, U.S. market returns remain concentrated in large U.S. growth companies while many smaller U.S. companies struggle. Primary factors impacting returns in July include: 1) falling U.S. dollar and 2) a rally in the FAAMG (Facebook, Apple, Amazon, Microsoft and Google) stocks. I'll share more about market and economic perspectives after we examine price, sentiment, and valuation at the beginning of August 2020.

July Market Update - Preparing for More Challenges

The S&P 500 gained 1.84% in June ending at 3100.29. YTD through June 30, the S&P 500 is down 4.04%. Before we review price, sentiment and valuation, I'd like to highlight two quotes from a speech Vice Chair for Supervision and Chair of the Financial Stability Board at the Federal Reserve Randal K. Quarles gave at the Exchequer Club in Washington, D.C. on July 7, 2020:

"We know that the financial system will face more challenges. The corporate sector entered the crisis with high levels of debt and has necessarily borrowed more during the event. And many households are facing bleak employment prospects. The next phase will inevitably involve an increase in non-performing loans and provisions as demand falls and some borrowers fail." 

"According to the latest International Monetary Fund forecast, the global economy is projected to contract sharply by 4.9 percent in 2020, a much worse outcome than during the 2007–08 financial crisis. While some indicators suggest a rebound in activity, the path of recovery remains highly uncertain."

The high level of uncertainty over the medium term will allow the Fed to keep rates lower for longer. I'll share more thoughts on the market and economy after we review price, sentiment and valuation.

June Market Update - Temporary Euphoria

The S&P 500 gained 4.53% in May 2020, ending at 3,044.31. YTD  through May 31, the S&P 500 is down 5.77%. Financial conditions have changed considerably since the March low. Fiscal and monetary support have contributed to a spike in U.S. large cap stocks. The chart below highlights the performance of WTI crude. It provides an example, one of many, showing the volatility investors have recently experienced:

This chart  from MarketWatch shows the performance of Crude Oil WTI (NYM $/bbl) Front Month contract, updated as of June 7, 2020. Now let's review price, sentiment, and valuation for June 2020.

May Market Update - Non-Gaussian Planning

The S&P 500 gained 12.68% in April 2020, ending at 2,912.43. YTD the S&P 500 is down 9.85%. Market return data through May 1, reveals the S&P 500 is down 16.4% since its February peak. The S&P 500 had its best monthly gain since 1987. Outside of equities we see gold had its best monthly return in nearly four years. There's a lot to cover, so let's dig into price, sentiment, and valuation as we start May 2020.