Category: Monthly Commentary

Monthly Commentary

January Market Commentary

Market Commentary

US stocks declined slightly to start the new year as optimism at the beginning of the month gave way to concerns about the continued spread of the coronavirus.  The new administration announced plans for a $1.9 trillion stimulus relief bill which would include additional stimulus checks for individuals, buoying markets over the first half of the month, but the spread of a new, more contagious, strain of the virus and concerns over the vaccine effort weighed on the outlook to end the month.  Corporate earnings have also impressed to date with the majority of companies topping expectations.  Economic news over the month showed a mixed picture.  On the positive side, manufacturing activity hit its highest level in two years, household income rose for the first time in three months, business activity picked up pace and consumer confidence rose.  However, the December jobs reports showed a loss of 140,000 jobs while the unemployment rate remained at 6.7%.  New unemployment claims remain elevated and retail sales fell 0.7% in December.  Fourth quarter GDP grew at a 4% rate, but fell short of expectations.

Foreign stocks edged up in January led by emerging markets.  European markets ticked down over the month as a new, more contagious strain of the coronavirus spread across the continent and drove additional business restrictions.  Factories in Asia and Europe increased their output in December pointing to a strong manufacturing sector. Saudi Arabia announced it would cut oil production by 1 million barrels a month starting in February as it’s grown concerned over a resurgent coronavirus.  Oil prices climbed 7.6% over the month.  China posted GDP growth of 6.5% in the fourth quarter, and 2.3% for the year despite the pandemic.  It was the only major world economy to see growth in 2020.  Emerging markets outpaced developed markets over January and the trailing twelve months.

Bonds fell to start the new year as interest rates rose on the expectation of increased stimulus measures from the new administration.  The Fed concluded its January meeting keeping all its supportive policies in place.  They stated the economy has cooled off more recently as a result of the upswing in COVID-19 cases and supportive measures will be needed for some time. The 10-year Treasury yield ended the month at 1.11%, its highest level since March, up from 0.93% to start the year.  Over the month muni and credit bonds were the top performing sectors, while over the trailing year, credit bonds led the way.  Longer term bonds trailed shorter term bonds in January, but outpaced shorter term bonds over the last twelve months.

Index PerformanceJan.Trl. 12 Months
US Stocks (Russell 3000)-0.44%18.64%
Foreign Stocks (FTSE AW ex US)0.22%12.97%
US Bond Mkt. (BBgBarc Int. Gov/Cred)-0.28%4.93%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.35%3.13%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.56%

 

December Market Commentary

Market Commentary

US stocks ended a roller coaster year at a new record high.  After plummeting in late February and March as a result of the coronavirus and the resulting business shutdowns, the market rallied over the remainder of the year driven by Fed and US government stimulus, business reopenings, better than expected corporate earnings, and finally a variety of highly effective vaccines for COVID-19.  Both the vaccine and the second pandemic relief bill were the main drivers of performance in December.  The $900 billion relief bill provides stimulus checks for individuals, additional funds for the paycheck protection program, and funding for vaccine distribution.  The Pfizer and Moderna vaccines received emergency approval and the vaccines began being administered during the month.  The approval was a significant step forward as hospitalizations and case numbers have continued to hit new highs.  Corporate earnings were surprisingly resilient after the shutdowns in the first and second quarter with much better than expected results over the second half of the year.  Economic news over the month showed the US still rebounding, but struggling under the weight of increasing COVID-19 cases.  The November jobs reports disappointed with 245,000 jobs added, less than half the gains of October, but the unemployment rate edged down to 6.7% from 6.9%.  New unemployment claims remain elevated.  Retail sales fell 1.1% and consumer confidence eased.  The housing market was a strength of the economy over the year with home prices reaching record highs and more mortgages were taken out than any year on record.

Foreign stocks climbed in December on a variety of positive developments.  The UK was the first western country to issue emergency approval of the Pfizer vaccine and begin distribution.  However, a new, much more contagious strain of the coronavirus was discovered in the country and prompted new lockdowns and travel restrictions.  After marathon negotiations, the European Union (EU) reached a spending deal for additional pandemic relief.  The European Central Bank (ECB) announced they would increase their bond buying program from $607 billion to $2.25 trillion and extended it until at least March 2022.  They also provided support for the banking system, boosting liquidity through several measures until June 2022.  The EU reached a trade agreement with the UK over its exit from the country bloc averting potential business chaos if the UK left the country bloc at the end of the year without a deal in place.  It puts an end to the Brexit saga that started four and a half years ago.  OPEC members and a group led by Russia agreed to increase oil output by 500,000 barrels a day starting in January as they believe the worst of the pandemic is over.  China’s economic activity continued to rebound in November.  Industrial output, investment, and consumer spending all picked up pace in November and manufacturing hitting its highest level in a decade.  Emerging markets outpaced developed markets over December, the fourth quarter, and the year.

Bonds posted gains to end the year that saw interest rates hit record lows and the Fed take unprecedented actions to help support the economy.  Information released at the conclusion of the Fed’s December meeting showed officials expect the Fed Funds rate to stay near zero through at least 2023.  The Fed has also been buying $80 billion in Treasurys and $40 billion in mortgage bonds a month and said that buying would continue “until substantial further progress has been made” toward broader employment and inflation goals.  The 10-year Treasury yield ended the year at 0.93%, up from 0.84% to start December, but down significantly from the 1.92% where it started the year.  Over the month and fourth quarter, credit and muni bonds were the top performing sectors, while over the year, credit bonds led the way.  Longer term bonds outpaced shorter term bonds over December, the quarter, and 2020 as a whole.

 

Index PerformanceDec.Q42020
US Stocks (Russell 3000)4.50%14.68%20.80%
Foreign Stocks (FTSE AW ex US)5.50%17.18%11.47%
US Bond Mkt. (BBgBarc Int. Gov/Cred)0.21%0.48%6.41%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.35%0.82%3.95%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.03%0.66%

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.

November Market Commentary

Market Commentary

US stocks had one of their best months ever, soaring to new record highs on better than expected COVID-19 vaccine news and a relatively clear outcome from the 2020 elections.  Results came back on vaccines from Pfizer, Moderna, and AstraZeneca all posting better than a 90% effective rate, well surpassing hopes.  Emergency approval and distribution is set to begin in December.  The results were a relief considering COVID-19 cases are hitting new hospitalization records.  With nearly all  S&P 500 companies reporting third quarter earnings 84% have posted a positive earnings per share surprise, which would tie the mark for the highest percentage of companies posting an earnings surprise.  The US economy continued to show growth with recent data.  Hiring numbers in October well surpassed expectations with 638,000 jobs added and the unemployment rate falling to 6.9% from 7.9%.  However, new unemployment claims have plateaued over recent weeks after seeing significant declines earlier in the year.  Factory activity expanded in October posting the sixth straight month of growth and business activity reached its highest level in more than five years. Retail sales disappointed, rising 0.3%, less than September and the five day shopping period including Black Friday and Cyber Monday was down significantly from 2019.  The housing market continues to be a strength of the economy with median home prices reaching a new record high and sales at the highest level in over a decade.

Foreign stocks surged in November on the positive vaccine news and central bank support.  The eurozone Purchasing Managers Index picked up pace in October and hit a 27-month high. The Bank of England announced another round of bond purchases as they stated they expect the UK’s economy to shrink in the fourth quarter. The Bank of Australia cut its benchmark lending rate to near zero and announced its own bond buying program. The ECB said it plans to increase its support for the eurozone in December with a support package that could include billions more in bond purchases, cheaper bank loans, and an interest rate cut.  Asia-Pacific countries reached a trade deal including China, Japan, South Korea, Australia, and 11 others that cover roughly a third of global economic output.  The deal facilities investment between the countries and reduces tariffs.  Developed markets topped emerging markets over the month, but emerging markets have led the way over the year to date.

Bonds posted solid gains over the month driven by a drop in interest rates.  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. However, later in the month, 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.  The 10-year Treasury yield declined to end the month at 0.84%, down from 0.88% to begin November.  Over the month, credit bonds were the top performer, while over the year, credit and government bonds were relatively in line.  Over November and the year to date, longer term maturities have outpaced shorter term maturities.

 

 

Index PerformanceNov.YTDTrl. 1 Yr.
US Stocks (Russell 3000)12.17%15.68%19.02%
Foreign Stocks (FTSE AW ex US)13.49%5.71%10.31%
US Bond Mkt. (BBgBarc Int. Gov/Cred)0.50%6.22%6.35%
Municipal Bonds (BBgBarc 1-10 Yr Muni)0.68%3.61%3.91%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.66%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.

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.