ClearWater Market Commentary as of October 16th, 2020
By Here is the ClearWater Market Commentary as of October 16th, 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 | -0.79% |
| 1 Month | 2.82% |
| YTD | -3.70% |
| 1 Year | 0.08% |
As of 2020/10/16
Source: www.marketwatch.com
| Index Performances | Last 5 Days | YTD |
| Shanghai Composite | 1.96% | 9.38% |
| WTI Crude (oil) | 1.26% | -32.97% |
| Hang Seng Index | 1.11% | -13.49% |
| Nasdaq | 0.79% | 30.08% |
| S&P 500 | 0.19% | 7.83% |
| Dow Jones Industrial | 0.07% | 0.24% |
| CAC 40 | -0.22% | -17.43% |
| Russell 2000 | -0.23% | -2.08% |
| S&P/TSX Composite | -0.75% | -3.66% |
| Nikkei 225 | -0.89% | -1.04% |
| DAX | -1.09% | -2.57% |
| FTSE 100 | -1.61% | -21.52% |
| Gold | -1.72% | 25.19% |
Last week’s and next week’s key economic events:
U.S. equities rise as economic data outweighs fading hopes for fiscal stimulus.
Encouraging economic reports sent U.S. stock markets up over the weekend, reversing earlier losses related to the lack of progress on new U.S. fiscal support measures.
Canadian equities showed less enthusiasm and ended the week in negative territory.
In Europe, several countries tightened containment rules that could cause economic damage. As economic concerns increased in Europe, bond rates fell and the U.S. dollar strengthened. This in turn lowered the prices of raw materials, including copper and gold.
In addition, a prediction by the International Monetary Fund (IMF) that the global economic downturn caused by COVID-19 would not be as severe as expected did not provide much support to equity markets.
US economy (S&P 500: +3.84%):
The S&P 500 declined earlier this week after U.S. Treasury Secretary Steven Mnuchin said a fiscal stimulus deal ahead of the November 3 election was unlikely. Nevertheless, the majority of this week’s economic data indicates a more steady economic recovery.
Economic Data: An index of small business optimism surged, several manufacturing surveys were higher, and ongoing unemployment insurance claims fell (although initial weekly claims unexpectedly increased). Friday’s reports of much stronger than expected September retail sales and higher consumer sentiment propelled equities into the green.
The week marked the unofficial start of earnings season, with 31 S&P 500 companies expected to report third-quarter results. Analysts currently expect overall third-quarter earnings for the S&P 500 to fall over 20% on a year-over-year basis.
The U.S. election is fast approaching and Biden’s lead in the polls persists. Below is a break down of the estimated impact of a Biden victory on the financial markets vs. the status quo.
U.S. Election Outlook:
Sources: Mackenzie Investments, Cornerstone Macro, Oxford Economics, Morgan Stanley Research, Goldman Sachs Research.
Performance 2020: S&P 500/400/600 Sectors
U.S. stock market valuations as of October 16th, 2020:
- Canadian markets (S&P/TSX : -0.75%):
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.
Equity Sectors: Health care posted the largest decline among the S&P/TSX sectors. The sector fell as the quarterly financial results season began, and Aphria Inc.’s results showed disappointing earnings for cannabis companies.
In the energy sector, stocks fell as oil prices remained 30% below their pre-pandemic levels.
The industrial sector dominated the rising sectors mainly due to the strength of Canadian Pacific Railway Ltd. shares after rail volumes were reported at solid levels.
- European and Asian economies:
European stock markets were all lower after Germany, France and the United Kingdom announced stricter limits on rallies.
Indeed, France went so far as to impose curfews for the next four weeks for Paris and several other major cities.
On the British stock side, shares ended the week in negative territory (-1.61%), as a summit between the UK and the European Union aimed at reaching an agreement on post-Brexit trade relations ended without a breakthrough on the main outstanding issues.
Australian equities outperformed the majority of Asian markets after the governor of the Central Bank of Australia suggested that interest rate cuts were being considered to support the economy.
All major European and Asian stock markets ended the week in positive territory. However, British equities (+1.94%) lagged the other major European markets, as statements by British and European politicians have made it more likely that a Brexit without an agreement at the end of 2020.
On the Asian side, it was a shortened week due to the closing of the stock exchanges from Monday to Thursday for the Golden Week vacations.
What to watch this week:
United States:
Economic Data:
- Housing starts, building permits – September
- Existing home sales – month of September
- U.S. Quarterly Results – Q3 2020 (schedule below)
Canada:
- Retail Sales – August
- Consumer Price Index – September
Sources: Bloomberg.com, Yardeni.com, Barron’s.com, Factset.com and Newyorkfed.org
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