ClearWater Market Commentary as of October 23rd, 2020

Here is the ClearWater Market Commentary as of October 23rd, 2020:

In this issue:
– Performance of Major Indices
– Market Commentary
– Last Week’s Key Economic  
  Events and Upcoming Events

Performance of Principle Indexes: 

S&P/TSX Composite Index
5 Day	-0.82%
1 Month	1.49%
YTD	-4.45%
1 Year	-0.61%

As of 2020/10/23 – Source: www.marketwatch.com

Index Performances	Last 5 Days	YTD
Hang Seng Index	2.18%	-11.60%
Nikkei 225	0.45%	-0.59%
Russell 2000	0.41%	-1.68%
Gold	0.03%	25.22%
S&P 500	-0.53%	7.26%
CAC 40	-0.53%	-17.87%
S&P/TSX Composite	-0.82%	-4.45%
Dow Jones Industrial	-0.95%	-0.71%
FTSE 100	-1.00%	-22.30%
Nasdaq	-1.06%	28.71%
Shanghai Composite	-1.75%	7.47%
DAX	-2.04%	-4.55%
WTI Crude (oil)	-3.05%	-35.01%

As of 2020/10/23

Last week’s and next week’s key economic events:
 

Stocks in both Canada and the U.S. fluctuated throughout the week in response to uncertainty in the U.S. about whether a fiscal stimulus deal will be reached before the November 3 presidential election. 

While House, Senate and White House officials continued to discuss the issue after a deadline imposed by House Speaker Nancy Pelosi passed, it seemed increasingly likely that a contingency plan would not be enacted until after the election. As a result, stock markets closed the week lower.

While the timing of the U.S. fiscal stimulus package remains uncertain, hopes that it would be substantial pushed up U.S. Treasury bill rates and also government bond rates around the world. The U.S. dollar, on the other hand, has fallen. 

Commodity prices were mixed: oil (-3.05%) fell under pressure from higher-than-expected U.S. inventories and persistent concerns about global demand, copper reached a two-year high and gold (+0.03%) remained almost unchanged.

• US economy (S&P 500: -0.53%): 

Sources: Mackenzie Investments, Cornerstone Macro, Oxford Economics, Morgan Stanley Research, Goldman Sachs Research.

In the S&P 500, the technology and consumer discretionary sectors were particularly weak following the antitrust lawsuit against Alphabet (Google).

However, Alphabet’s stock itself ignored the news and ended the week positively, suggesting that investors did not view the lawsuit as a threat to the company’s business as initially feared by the market.

On the Facebook side, the stock also had a good week, winning simultaneously with Snap Inc, which jumped after solid quarterly results. Thanks to Alphabet and Facebook’s gains, Communication Services was the strongest sector of the S&P 500 this week. 

Eyes remain on possible stimulus package as President Donald Trump repeated his willingness to back a stimulus deal even larger than the USD $2.2 trillion relief package proposed by the Democrats. 

Housing remains the standout in the recovery. Single-family construction and overall building permits reached a new 13-year high. Weekly jobless claims broke a streak of negative surprises and fell more than expected to 787,000, the lowest level since March. 
 

Performance 2020: S&P 500/400/600 Sectors 

U.S. stock market valuations as of October 23rd, 2020:

• Canadian markets (S&P/TSX : 0.18%):

Economic Data: The Bank of Canada has signaled an improvement in the economic environment by reducing the emergency measures it put in place last spring to stabilize equity markets. 

Stock market Sectors: The technology heavyweight, Shopify Inc. has backed down in tandem with large-cap technology companies in the United States, which came under pressure when the U.S. Department of Justice filed a complaint accusing Alphabet of abusing its monopoly power. Two weeks ago, an antitrust subcommittee of the U.S. Congress issued a report calling for the dissolution of large technology companies. 

The industry sector declined after Canadian National Railway Company and Canadian Pacific Railway Company Ltd. reported revenues and earnings below analyst expectations.  

Finally, the health care sector had a good week as cannabis stocks rose in response to media reports highlighting the potential positive impact on business of a Democratic victory in the upcoming U.S. election.
 

• European and Asian economies:

  
The major stock markets in Europe ended the week in negative territory mainly due to the daily new infections related to COVID-19, which reached record levels in several countries. As economic restrictions continued to tighten, consumer confidence measures in Europe declined. 

In France, the business confidence index declined for the first time since April. 

Meanwhile, in Asia, Chinese stocks retreated for a week while in Japan, stock markets made a slight gain after the decline in machinery orders was less than expected.

Finally, in Hong Kong, stocks rose after industrial production and retail sales in China exceeded expectations.
 

What to watch this week:

United States: 

• GDP – Q3 2020
• New home sales – month of September 
• Durable Goods Orders – Month of September
• Conference Board Consumer Confidence Index – Month of October
• Personal Income and Expenses – Month of September 

Canada:

• Bank of Canada Interest Rate Decision (October 28)
• Gross Domestic Product – August

Sources: Bloomberg.com, Yardeni.com, Barron’s.com, Factset.com and Newyorkfed.org

Thank-you for checking out our ClearWater Market Commentary for October 23rd, 2020. If you would like to receive the ClearWater Commentary at the start of every week, sign-up for our Newsletter.