Category: Monthly Commentary

Monthly Commentary

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.

September Market Commentary

Market Commentary

US stocks posted their first down month since March on concerns over both whether additional fiscal stimulus will be delivered and the economy.  However, in the third quarter, US stocks continued their strong rebound from the pandemic induced declines of the first quarter. After much negotiating between Congress and the Trump administration, no additional fiscal relief appears likely before the election.  While still showing growth, the US economy has cooled recently.  Employers added 1.4 million jobs in August and the unemployment rate fell to 8.4%.  New claims for unemployment insurance held steady over the month as layoffs remain high.  US industrial production, retail sales, manufacturing, and service sector activity gained, but a slower pace than earlier in the summer.  US retail store closings over the first half of the year reached a record and the year is on pace for a record number of bankruptcies and liquidations due to the pandemic.  Sales of previously owned homes rose 2.4% in August and home purchases reached a 14 year high.  Consumer confidence rebounded in September to reach a level last seen in March.

Foreign stocks declined in September on concerns over economic growth and increasing infection rates. Daily new case numbers in the European Union and the U.K. of more than 45,000 raised concerns about additional business restrictions and shutdowns that could severely limit economic recovery in the region.  Purchasing managers in Germany, France, and Japan showed the flare ups of coronavirus cases were cooling service sector activity in Europe and Asia.  The UK grew 6.6% in July from June, but grew at an 8.7% rate in June from May.  China and Germany posted an acceleration of growth in manufacturing in August.  China’s retail sales recovered to pre-pandemic levels.  In addition, factory production, investment and property activity all gained pace in China in August.  Emerging markets outpaced developed markets in September, the third quarter and the year to date.

Bonds were flat for September as interest rates were stable.  The Fed left interest rates unchanged after its September meeting and said it planned to keep interest rates near zero through 2023.  It would keep rates near zero until the economy is close to full employment and inflation “is on track to moderately exceed 2% for some time.”  The 10-year Treasury yield remained very stable over the month ending at 0.69% down only slightly from 0.72% to start September.  For the month and year to date, government bonds were the top performers with longer term maturities outpacing shorter term maturities. Over the third quarter, it was credit bonds leading the way with longer term maturities outpacing.

 

 

Index PerformanceSept.3QYTDTrl. 1 Yr.
US Stocks (Russell 3000)-3.64%9.21%5.41%15.00%
Foreign Stocks (FTSE AW ex US)-2.27%6.52%-4.83%3.83%
US Bond Mkt. (BBgBarc Int. Gov/Cred)-0.01%0.61%5.92%6.32%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.11%1.04%3.12%4.03%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.03%0.52%0.96%

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.

August Market Commentary

Market Commentary

US stocks soared over the month, surpassing their mid-February level, to post new records highs. The jump was driven by similar themes including fiscal and monetary stimulus, positive news on a vaccine, and better than expected economic readings.  US Stocks have now gained for five straight months.  With all S&P 500 companies reporting second quarter earnings, 84% topped earnings estimates and 65% outpaced revenue projections by analysts. There are currently multiple vaccines in later stages of testing that have shown promise. The US economy continued to improve over the month.  Employers added 1.8 million jobs in July and the unemployment rate fell to 10.2%.  New claims for unemployment insurance continued to decline over the month, albeit at a slower rate.  The number of people receiving unemployment benefits has dropped to the lowest level since April, 14.8 million.  Manufacturing expanded in July at a faster rate than expected and retail sales rose, surpassing the retail spending level before the pandemic.  Sales of previously owned homes rose 24.7% in July over June.  It was the strongest monthly gain ever recorded and the highest monthly sales pace since December 2006.

Foreign stocks rose in August as well on improving economic numbers, monetary stimulus, and positive news on a vaccine. Second quarter growth results showed how significant an impact COVID-19 had as Germany contracted by 10%, Italy 12%, France 14%, Spain 19%, and the UK 20.4%.  Comparably, the US contracted 10%.  Manufacturing surveys in Europe and Japan posted strong gains in July.  Inflation contracted in Europe in August leading many to believe the European Central Bank will seek to take new stimulus efforts.  China posted a 9.5% increase in exports and improved manufacturing results as the country continues to rebound. Emerging markets trailed developed markets in August, but have outpaced developed markets for the year to date.

Bonds posted their first down month since March as interest rates rose.  In the Fed’s July meeting minutes, officials expressed concern over the economy and its continued recovery.  They believed additional support was needed for the economy from both the government and the Fed.  However, they didn’t come to any conclusions on what support they would provide or when that would occur. They also approved a significant change in how they manage inflation.  They will no longer proactively raise the Fed Funds rate to head off higher inflation and instead allow it to remain higher than their 2% target if inflation runs below 2% for a period of time.  It will seek to target an average inflation rate of 2%.  The move likely means interest rates will remain lower for longer.  The 10-year Treasury yield reached its highest level since mid-June ending the month at 0.72%, up from 0.55% to start August.  For the month, credit and agency bonds were the top performers with shorter term maturities outpacing longer term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.

 

Index PerformanceAugustYTDTrl. 1 Yr.
US Stocks (Russell 3000)7.24%9.39%21.44%
Foreign Stocks (FTSE AW ex US)4.44%-2.62%9.08%
US Bond Mkt. (BBgBarc Int. Gov/Cred)-0.12%5.94%5.95%
Municipal Bonds (BBgBarc 1-10 Yr Muni)-0.14%3.01%3.16%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.62%1.26%

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.

July Market Commentary

Market Commentary

US stocks continued to surge in July on fiscal stimulus hopes, better than expected corporate earnings, optimism over business reopenings, and positive economic news.  Stocks gained despite climbing infection rates in many states.  US Stocks posted their best four month percentage gain since December 1998.  Negotiations in Washington are ongoing over another economic relief bill that would continue unemployment benefits for millions of Americans.  With over 40% of S&P 500 companies reporting earnings to date they have posted a decline of 41%, but with 79% topping forecasts.  Illustrating the massive and unprecedented impact of COVID-19, US GDP contracted at a 32.9% rate in the second quarter. However, there were positive economic signs during the month with the unemployment rate dropping to 11.1% in June and the economy adding 4.8 million jobs.  New claims for unemployment insurance fell earlier in the month, but plateaued to end the month.  US retail sales topped expectations again gaining 7.5% and US manufacturing activity began to grow.  Sales of previously owned homes rose 20.7% in June, the biggest monthly gain on record, but remains 11.3% below from a year earlier.  Gold ended the month at a new all time high of $1,963 a troy ounce.

Foreign stocks climbed over the month on improving economic numbers and additional fiscal stimulus.  July saw improving manufacturing numbers in Europe and Asia.  Eurozone retail sales topped expectations and German factory orders surged 10.4%.  EU leaders reached an agreement on an $859 billion stimulus measure and the country bloc will issue its first ever common debt.  The agreement now must be approved by the governments of each member country.  China was the first major economy to post growth after the pandemic rising 3.2% in the second quarter.  Emerging markets have outpaced developed markets for the month and the year to date.

Bonds continued to climb in July as interest rates ticked down.  Interest rates eased over concern of the pace of the economic recovery and continued support from the Fed.  The Fed concluded their July policy meeting saying they would continue to hold the Fed Funds rate near zero through at least 2022 and increase their holdings of Treasuries and other securities. They extended all their emergency lending programs by three months to the end of the year to help support the economy.  The 10-year Treasury yield fell over the month ending at 0.54%, down from 0.66% to start July and down significantly from the start of the year.  For the month, credit bonds were the top performers with longer term maturities outpacing short term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.

Index PerformanceJulyYTDTrl. 1 Yr.
US Stocks (Russell 3000)5.68%2.01%10.93%
Foreign Stocks (FTSE AW ex US)4.36%-6.76%1.35%
US Bond Mkt. (BBgBarc Int. Gov/Cred)0.75%6.06%7.95%
Municipal Bonds (BBgBarc 1-10 Yr Muni)1.08%3.16%4.02%
Cash (ICE BofA ML 3-Mo T-Bill)0.02%0.50%1.30%

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.

June Market Commentary

US stocks’ recovery continued in June as optimism over business reopenings remained high and economic news topped expectations. US stocks posted their best quarterly performance since 1998 as all states opened up for business to some degree in June. For the quarter, the Fed’s moves and stimulus measures by the US government provided support for US stocks.  Economic news began to improve despite the US officially entering a recession beginning in February.  While new claims for unemployment insurance remain high, employers added 2.5 million jobs in May, the most on record, significantly better than the further job losses expected. The unemployment rate fell from 14.7% in April to 13.3% in May.  US retail sales soared 17.7%, significantly outpacing expectations, and new homes sales jumped 21% in May.  Us manufacturing output continued to contract, but at a slower pace and purchasing manager surveys showed global business activity had slower declines in May suggesting the recent economic weakness could be bottoming out.

Foreign stocks were the top performing asset class in June and posted their best quarter in nearly 10 years driven by the loosening of lockdowns, improving economic numbers, and central bank support.  Providing a glimpse of the trough of economic performance brought on by the virus, the UK said April GDP was down 25% from a year earlier.  The European Central Bank (ECB) significantly increased its bond buying program to $1.52 trillion, moving it more in line with the Fed.  EU officials are still negotiating on a $2 trillion coronavirus response plan, but most European countries have fully reopened and have not seen a new surge in cases.  Oil continued to rebound, rising 10.6% over the month to finish at $39.27 a barrel driven by OPEC production cuts as well as reduced production in the US.  China continues to bounce back from Covid-19 with manufacturing activity and the service sector showing growth in May.  Emerging markets have outpaced developed markets for June, the second quarter, and the year to date.

Bonds rose in June as interest rates remained flat.  After the Fed’s June meeting they stated they planned to not raise interest rates through 2022 and they will continue their current pace of Treasury and mortgage backed security purchases.  The Fed also announced during the month they were expanding the municipalities allowed to borrow directly from the Fed’s lending program and it would expand its bond buying program to include debt from individual companies.  Since the virus began significantly impacting the US, the Fed has implemented nine different emergency lending programs to support the economy.  The 10-year Treasury yield was flat over the month ending at 0.66%, only down slightly from 0.70% where it started the second quarter.  However, it has declined significantly from 1.92% to start the year.  For the month and quarter, credit bonds were the top performers with longer term maturities outpacing short term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.

Index Performance  June2QYTDTrl. 1 Yr.
US Stock (Russell 3000)2.29%22.03%-3.48%6.53%
Foreign Stock (FTSE AW ex US)4.48%16.56%-10.65%-3.99%
US Bond Mkt. (BarCap Int. Gov/Credit)0.62%2.81%5.28%7.12%
Municipal Bonds (BarCap 1-10yr Muni)0.39%2.68%2.06%3.65%
Cash (ICE ML 3Month T-Bill)0.01%0.02%0.60%1.63%

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.