Author: Ryan Frydenlund

Ryan Frydenlund

Financial News and Portfolio Management Discussion through November 21st

US stocks ticked down over the week as more positive news on the vaccine front was countered with new record virus and hospitalization rates.  The S&P 500 declined 0.8% and the Dow fell 0.7% for the week.  Abroad, the FTSE All World Ex US rose 1.6% for the week.  The yield on the 10-year Treasury fell over the week to end at 0.83% down from 0.89%.

Moderna announced its vaccine trial showed it was 95% effective.

Asia-Pacific countries reached a trade deal including China, Japan, South Korea and 12 other countries that cover roughly a third of global economic output.

New cases and hospitalizations related to COVID-19 hit daily records over the week.

Retail sales rose 0.3% in October, significantly below the gain seen in September.

Initial jobless claims rose to 742,000 for the past week up from 709,000 the week before.

Sales of previously owned homes hit a 14 year high in October and median home prices hit a new high as well.

Treasury Secretary Mnuchin announced he would let several of the Fed’s emergency lending facilities expire at the end of the year, despite the Fed’s objections.

Tesla will be added to the S&P 500 on December 21st.

Financial News and Portfolio Management Discussion through November 14th

Global stocks surged over the week on news of highly effective vaccine results with US stocks ending the week at a new record high.  The S&P 500 rose 2.2% and the Dow surged 4.1% for the week.  Abroad, the FTSE All World Ex US climbed 2.9% for the week.  The yield on the 10-year Treasury rose over the week to end at 0.89%.

Results from a vaccine candidate from Pfizer showed 90% effectiveness, much higher than anticipated.

Coronavirus hospitalizations set a new record on Wednesday, while a record 150,00 new cases were reported on Thursday.

New US jobless claims fell to their lowest level since March at 709,000.

With most S&P 500 companies reporting earnings, analysts project profits fell 7.5% from a year earlier, much better than the expected 21% drop.

October Market Commentary

Market Commentary

US stocks fell for a second straight month on disappointment over the lack of a new fiscal stimulus deal combined with concerns over a second wave of the virus.  No stimulus deal was reached between Congress and the Trump administration despite a growing chorus for aid, with potentially no deal until 2021.  Meanwhile, COVID-19 cases hit new daily records during the month.  Corporate earnings have been stronger than expected to date with 64% of S&P 500 companies reporting earnings to date, 86% have posted a positive earnings per share surprise and 81% have reported a positive revenue surprise.  The economy continued to bounce back, but at a more muted pace.  Employers hired 661,000 individuals in September.  The first time below 1 million and short of expectations.  The US has added back 11.4 million of the 22 million lost in March and April.  The unemployment rate dropped to 7.9% from 8.4%.  New claims for unemployment insurance fell over the month to reach their lowest level since March.  Retail sales beat expectations and personal income rose, but manufacturing grew at a slower pace and auto sales were down 11% in the third quarter.  Sales of previously owned homes rose to a 14 year high in September.  Third quarter GDP came in at 33.1%, the largest ever quarterly gain as the economy regained roughly two-thirds of what it had lost in the prior quarter.

Foreign stocks fell in October over rising COVID-19 cases.  Europe tightened lockdown measures to fight surging infection numbers with the UK, France, and Germany instituting new lockdowns. Evidence of increasing restrictions in the eurozone was on display in the October purchasing managers index, measuring the manufacturing and service sectors, as it fell to a four month low.  To help stem the tide the UK announced new financial support for companies impacted by coronavirus restrictions.  South Korea’s GDP rose a better than expected 1.9% in the third quarter.  It joins China, which saw GDP growth of 4.9%, Taiwan, and Vietnam who have posted growth while countries in the west are still struggling to rebound from COVID-19.  Emerging markets outpaced developed markets over the month and the year to date.

Bonds ticked down in October as interest rates rose.  Meeting minutes from the Fed’s September meeting show the group was divided over how to communicate its new policy of allowing inflation to rise above 2% in order to target an average inflation level of 2%. Communication is key to helping set market expectations and avoid significant volatility in the bond market.  The 10-year Treasury yield climbed over the month ending at 0.86%, up from 0.69% to start October.  It was the highest one month jump since September 2018.  In September, credit bonds were the top performer with short term maturities outpacing longer term maturities, while over the year to date, government bonds topped other sectors and longer term maturities outpaced shorter term maturities.

 

Index PerformanceOct.YTDTrl. 1 Yr.
US Stocks (Russell 3000)-2.16%3.14%10.15%
Foreign Stocks (FTSE AW ex US)-2.14%-6.86%-1.91%
US Bond Mkt. (BBgBarc Int. Gov/Cred)-0.22%5.69%5.67%
Municipal Bonds (BBgBarc 1-10 Yr Muni)-0.20%2.91%3.44%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.53%0.80%

There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.  Source: Morningstar, Inc.

Election Results: What We Know

Last week certainly felt like a rollercoaster as news outlets waited until Saturday morning to declare Joe Biden as the president-elect, a full four days after Election Day in the US.  Although party control of the Senate will likely be decided in January, with two run-off elections in Georgia, the last week provided a powerful reminder of the importance of staying disciplined.

Election Results: What We KnowRead more

Financial News and Portfolio Management Discussion through November 9th

Global stocks surged over the week on relative clarity over US election results.  Stocks posted their best week since April.  The S&P 500 jumped 7.3% and the Dow surged 6.9% for the week.  Abroad, the FTSE All World Ex US soared 7.5% for the week.  The yield on the 10-year Treasury declined to end the week at 0.82%.

US employers added 638,000 jobs in October well surpassing expectations.  The unemployment rate fell to 6.9%, when it was expected to be 7.7%.  New jobless claims fell to 751,000, the lowest level since March, but the pace of declines has significantly leveled off. The labor market has regained over half of the 22 million jobs lost in March and April.

Factory activity expanded at a faster clip than expected in October and posted a sixth month of expansion.

The eurozone Purchasing Managers Index picked up pace in October and hit a 27-month high.

The Fed’s November meeting concluded with no changes in policy.  They still said the coronavirus posed significant risks to the US economy, recommending additional fiscal stimulus, and they maintained their existing monetary stimulus measures.

The Bank of England, Bank of Australia and ECB all announced additional monetary stimulus measures.