ClearWater Market Commentary as of October 13th, 2020
By Here is the ClearWater Market Commentary as of October 13th, 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 | 0.61% |
| 1 Month | 0.92% |
| YTD | -3.24% |
| 1 Year | 0.58% |
As of 2020/10/09 – Source: www.marketwatch.com
| Index Performances | Last 5 Days | YTD |
| Russell 2000 | 3.66% | -2.00% |
| CAC 40 | 1.07% | -17.24% |
| Dow Jones Industrial | 3.27% | 0.50% |
| DAX | 0.88% | -1.74% |
| S&P 500 | 4.52% | 8.73% |
| Nasdaq | 6.36% | 32.22% |
| FTSE 100 | 0.33% | -20.85% |
| S&P/TSX Composite | 1.68% | -3.25% |
| Nikkei 225 | 0.72% | -0.23% |
| Hang Seng Index | 2.57% | -12.74% |
| Shanghai Composite | 4.40% | 10.15% |
| WTI Crude (oil) | 9.4% | -33.6% |
As of 2020/10/09
Last week’s and next week’s key economic events:
US Stocks See best gains in three months
- The S&P 500 had its best weekly in gain in three months as investors grow more optimistic about a new round of fiscal stimulus
- In our opinion, regardless of who wins the US election, a fiscal stimulus package is likely required to re-accelerate the US economy. This could improve expectations for economic growth and have a positive impact on inflation. An associated steepening of the yield curve is historically positive for value.
- Central banks around the world are finding it difficult to further cut interest rates as monetary policies could be reaching limits of effectiveness.
- Thus there would be significant pressures on governments to stimulate global economies as most are still suffering from a bumpy recovery from the pandemic.
Historically, the wider the time horizon, the lower the probability of equity losses!
Probability of negative returns, based on S&P 500 Total Returns from 1929 – present
- US economy:
Performance 2020: S&P 500/400/600 Sectors
Stimulus hopes boost sentiment despite conflicting signals. Stocks rose after Monday reports that House speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin had spoken by phone and were prepared to exchange to proposals.
The rally continued through the week, but the market pulled back sharply after President Donald Trump tweeted that the economy was “doing really well” and that he had “instructed my representatives to stop negotiating until after the election.”
The President than reversed course tweeting his support for targeted assistance for airlines and small businesses, as well as a new round of $1200 direct payments to individuals. The White House Friday also reported that the were planning on upping the scale of a broad stimulus plan from 1.6 Trillion USD to 1.8 Trillion USD. The President later told a conservative radio talk show host that he was prepared to go even higher than the Democrats’ proposal of 2.2 Trillion USD. Stocks rallied on the news.
- Canadian markets:
Canadian markets climbed last week with the driver being the better than expected economic data and the anticipation that another U.S. stimulus package will eventually be passed.
Canada’s economy added 378,000 jobs in September, solidly exceeding expectations, while the unemployment rate declined to 9% from 10.2%.
The domestic economy has now recouped nearly 75% of the jobs lost since March, and most of the job gains came from full-time positions instead of part-time, which is a positive.
Economic recovery is progressing, supported by pent-up demand, fiscal stimulus and low interest rates.
- European and Asian economies:
European shares rose on the hopes that the U.S. government would pass additional measure to stimulate the economy.
Rising COVID-19 cases trigger local lockdowns in Europe. Cases continue to rise sharply in Spain, Italy, France, and the UK despite targeted measures to control the diseases spread.
The UK’s economy continues to falter, while France rebounds sharply. The French economy rebounded 16% in the third quarter from an almost 14% contraction in the previous three months.
The UK and EU step up pace of post-Brexit trade talks as they agreed to carry on discussions for another month.
China’s stock markets rose Friday after being closed from October 1 to 8 for the national Golden Week holiday. The Shanghai Composite A-Share index rose 1.7%.
Japanese stocks surged over the week, recording their best weekly return in about two months. The Nikkei 225 stock Average advanced 590 points (2.6%) and the YTD period is now at (-0.16%).
The Bank of Japan continues to become more upbeat on economic prospects and has raised its outlook for 8 of its 9 economic regions. Japan’s policy makers believe economic conditions remain severe but are gradually improving.
What to watch this week:
- Corporate earnings season kicks into high gear
- Apple expected to announce iPhone 12 at launch event
- Amazon Prime Days want to jumpstart holiday shopping
Sources: Bloomberg.com, Yardeni.com, Barron’s.com, Factset.com and Newyorkfed.org
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