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 Performance||Sept.||3Q||YTD||Trl. 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.