Economic Data Watch and Market Outlook
The S&P 500 was roughly flat for the week, up just 39 basis points. It was expected that economic data would dominate the headlines but as most thing it 2020 that was not the case. Employment numbers took a back seat to the first U.S. Presidential debate and the fallout from the President, staff members and several senators testing positive for COVID dominated the news cycle.
The US Economy added 661,000 jobs with small business adding the bulk of those jobs. Today, 11.4 million of the 22 million jobs lost during the shutdown have been replaced as the unemployment rate fell to 7.9%. However, as stimulus winds down multiple corporations such as American Airlines, United Airlines, Disney and Allstate announce planned layoffs.
While the S&P 500 was only slightly positive, much of the action was taking place in the returns of growth and value. Growth and Value have rotated each week and this past week was no different with Value stocks advancing almost 1.2% while growth declined by five basis points.
The Week In Review
Equities
Fiscal stimulus talks remain in neutral as Congress deals with Supreme court appointments and its own bout with COVID.
- S&P 500 Week +1.55%, September -0.42%, YTD +5.13%
- S&P 500 Equal Wgt ETF (RSP) Week 2.83%, September +5.15, YTD -1.53%
- Russell 2000 Week 4.42% September -3.34% , YTD -6.76%
- MSCI EAFE Week + 1.53% September -2.60% , YTD -7.08%
- MSCI EM Week +2.21 September -1.60% , YTD -1.15%
Drivers:
I) Investors continue to monitor the impact of COVID 19 on the economy, and unemployment has shown signs of recovery. Further stimulus may be necessary however as some companies have indicated they will likely layoff employees.
II) Performance was muted on the last day of the week due to uncertainty relating the President’s physical health. The S&P fell 95 basis points on Friday detracting from strong gains during the week.
III) Strong Broad market performance and positive performance in Value stocks during the week and the month of September narrowed the gap between the S&P 500 on a Cap weighted and Equal Weighted basis.
Fixed Income
As the week progressed, market participants were focused on the President’s COVID affliction and prospects for his health. While this temporarily displaced the stimulus package debate, that conversation continues to draw attention with every headline being scrutinized for clues regarding passage.
As of this writing, there was some slight upward pressure on the benchmark ten year Treasury owing to the continued economic recovery and the potential for an acceleration should Washington agree on further support. It is important to note that yields remain in a narrow trading range with no clear change in direction across the various sectors. We are maintaining our duration targets neutral to benchmarks and remain focused on any meaningful shifts in fundamentals or sentiment.