Archive for ND&S Updates
ND&S Weekly Commentary 11.23.20 – Markets Tempered by Virus Surge
November 23, 2020
U.S. equity markets dipped last week as investors weighed the realities around rising Covid-19 infections. In response, we saw more cities and states implement restrictions in an effort to slow the spread.
For this past week, the S&P 500 declined 0.73% while the DJIA gave back 0.65%. The tech-heavy NASDAQ ticked higher by 0.25%. Small company stocks, represented by the Russell 2000, bucked the trend as the index closed higher by 2.38% for the week. International equity markets also finished higher as the MSCI EAFE and emerging markets (MSCI EM) added on 1.88% and 1.77%, respectively. Bonds had a strong week as the Bloomberg/Barclays Aggregate finished the week up 0.59%. As a result, the 10 YR US Treasury closed at a yield of 0.83% (down 6 bps from the previous week’s closing yield of 0.89%). Gold prices closed at $1876/oz. – down 0.69% on the week. Oil (WTI) moved higher to close at $42.15 – up 5.03% on the week.
Economic news released last week was mixed. Retail sales advanced 0.3% in October, missing estimates of a 0.5% increase. Industrial production increased 1.1% in October, beating estimates of 1.0%. Existing home sales increased 4.3% in October and is now up a whopping 26.6% from the same time last year. Housing continues to be a bright spot for the economy as support from low rates continues. Lastly, weekly jobless claims were 742,000, missing estimates of 711,000. Despite the holiday-shortened week, there will be reports on Markit US manufacturing and services PMIs, personal income, durable goods orders, and consumer confidence. The Bureau of Economic Analysis will also report their update for 3Q2020 GDP on Wednesday.
Although we must navigate the market and economies response to rising case counts near-term, there is light at the end of the tunnel and multiple vaccines should be widely available by Spring/Summer 2021. We expect markets to continue to be choppy like this past week. We have witnessed a rotation in recent weeks with areas that previously lagged benefiting the most on the vaccine news. As always, investor focus should remain on long-term goals.
First and foremost, we hope that all of you and your families are staying healthy and safe during this recent spike in cases. Although this year will feel a little different due to COVID-19, we wish to extend to all a very Happy Thanksgiving!
“An attitude of gratitude brings great things.” – Yogi Hhajan
ND&S Weekly Commentary )Weekly Commentary (11/16/20) – Markets Mostly Higher on Vaccine News
November 16, 2020
Most markets advanced last week on news that Pfizer’s vaccine candidate was greater than 90% effective in preventing covid-19. Despite an ominous rise in covid-19 cases last week, investors chose to focus on the great news out of Pfizer along with optimism for a similar outcome for Moderna’s vaccine candidate. Investors rotated out of high-flying technology names and into economically-sensitive names as evidenced by the last week’s results for the Russell 1000 – the growth index was negative by 1.27% while the value index shot up 5.69%.
For the week, the DJIA advanced 4.19% while the S&P 500 gained 2.16%. The tech-heavy Nasdaq lost 0.55%. Developed international markets moved nicely higher as investors added to beaten-down international stocks. For the week, the MSCI EAFE index gained 3.89% while emerging market equities (MSCI EM) jumped 1.03%. Small company stocks, represented by the Russell 2000, finished ahead by 6.13% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly lower as the index closed lower by 0.14%. As a result, the 10 YR US Treasury closed at a yield of 0.89% (up ~6 bps from the previous week’s closing yield of ~0.83%). Gold prices closed at $1,885.70/oz – down 3.31% on the week. Oil prices jumped $2.99 (or 8.1%) last week as investors bet that an economic recovery will lead to increased demand for oil.
Economic news released last week was mixed. On Thursday the U.S. Bureau of Labor Statistics (BLS) announced that the Consumer Price Index (CPI) was unchanged in October, missing expectations for a 0.1% advance. The CPI advanced 1.2% year-over-year. Also on Thursday the Department of Labor reported that initial jobless claims for the week ending November 7 were 709,000, better than expectations of 740,000. On Friday the BLS reported that the Producer Price Index (PPI) gained 0.3% in October, ahead of expectations for a 0.2% advance. The PPI advanced 0.5% year-over-year. Neither the CPI nor PPI point to unreasonable or out of control inflation, and this gives the Fed more time to remain accommodating. Economic news in the week ahead will focus on retail sales, industrial production, housing starts and existing home sales.
We suggest investors stay close to their long-term target asset allocations with a slight defensive bias. Stay Safe!
“Perseverance is not a long race; it is many short races one after the other.” – Walter Elliot
ND&S Weekly Commentary (11.9.20) – Markets Rebound
November 9, 2020
Equity markets rebounded last week on generally good economic news and election results that indicate neither Democrats nor Republicans received a broad mandate. Divided governments are widely thought to be good for the stock market. Also this morning, U.S. equity markets are up strongly on the announcement by Pfizer and BioNTech that their Covid-19 vaccine candidate is more than 90% effective in latest trials.
The S&P 500, DJIA, and NASDAQ were up 7.4%, 6.9% and 9.1 %, respectively. The best performing sectors for the week were technology, healthcare, and materials. The worst performing sector continued to be energy. International equities also advanced with MSCI EAFE up 8.1% and emerging markets (MSCI EM) higher by 6.6%. Bond prices rose last week with the rate on the 10 year U.S. Treasury dropping from 0.88% to 0.83%.
In economic news last week, Friday’s jobs report showed that hiring picked up last month at a faster pace than expected with an increase of 683,000. As a result, the unemployment rate dropped to 6.9%, beating estimates of 7.7%. The Institute of Supply Management (ISM) reported their purchasing manager’s index (PMI) for manufacturing at 59.3%, much better than estimates of 55.8%. The Non-Manfacturing Index which tracks the services sector fell to 56.6% missing estimates of 57.5%. The Federal Open Market Committee met last week leaving their policy unchanged. Chairman Jerome Powell mentioned the need for “further (economic) support” to help fight the effects from the Covid-19 virus.
As mentioned above, markets are reacting positively this morning on Covid-19 vaccine news with the strongest action on names hit hardest by the pandemic. We continue to recommend that investors maintain a fully diversified portfolio consistent with their long-term objectives and risk tolerance.
“It always seems impossible until it’s done.” – Nelson Mandela
ND&S Weekly Update: The Election – Here We Go!
November 2, 2020
Last week was a wake-up call for investors as Wall Street closed out its worst month since March. The market’s largest tech companies reported solid earnings but muted guidance, the election heated up and the resurgence in coronavirus infections continued in the U.S. and Europe (where lock-down restrictions are being implemented).
For the week, the DJIA closed down 6.47%, the S&P 500 declined 5.62%, and the tech-heavy NASDAQ shrunk 5.50%. Foreign markets also took it on the chin with Developed Markets (MSCI EAFE) dropping 5.51% and emerging markets (MSCI EM) slipping 2.89%. The technology sector slid 6.5% for the week. The price of oil also declined by 10.2% per barrel and gold was off by 1.3%.
There has been upward pressure on interest rates with the yield curve continuing to steepen on the intermediate and long-end. The yield on the 10 Yr. U.S. Treasury ticked higher to 0.88% from 0.86% the week prior.
Despite the U.S. economy growing at a record pace, increasing 7.4% in the third quarter and at a 33% annual rate, the concerns over the elections and potentially overvalued large tech companies took hold. In other economic releases, durable goods orders increased 1.9% in September beating estimates, Core PCE (personal consumption expenditures) advanced 3.5% quarter-over-quarter, and pending home sales contracted 2.2% in September missing estimates.
The earning season so far has been solid with 60% of companies in the S&P500 having reported, with 80% of them beating their estimates. Though earnings are off 12.55% from a year ago, they are much better than predicted and overall guidance is improving. Still all eyes are on revenues and investors are willing to pay up for companies with sustainable sales growth.
There is no question that our economy needs another major stimulus program. Congressional leaders failed to agree on roughly a $2 trillion stimulus package which covered enhanced unemployment benefits, more government backed loans and stimulus for households.
The results of Tuesday’s election will determine the political direction of the U.S. and its effect on our economy and global financial markets. We strongly suggest that investors maintain a well-diversified portfolio with a slight conservative bias favoring dividend income and growth.
“George Washington is the only President who didn’t blame the previous administration for his troubles.” – Author Unknown
ND&S Weekly Commentary 11.30.20 – More Stimulus Please
November 30, 2020
The Thanksgiving holiday-shortened week gave investors and traders a lot to be thankful for. The US and global markets all performed very well for the week and the month of November. The Dow Jones Industrial Average (DJIA) crossed the 30,000 mark for the first time, with its best monthly return since January 1987. Both the DJIA and the S&P 500 realized their best November returns since 1928.
Investors have been challenged by the positive vaccine news and the escalating COVID-19 cases and hospitalizations. The election turmoil has also brought with it uncertainties and anxieties over political control and economic strategies going forward.
For the week, the DJIA returned 2.25%, the S&P 500 was up 2.3% and the tech-heavy Nasdaq, which had been under pressure, rebounded 2.97%. Foreign stocks also felt relief with Developed and Emerging markets gaining 2.24% and 1.79%, respectively. The slew of positive vaccine news and encouraging economic prospects lifted cyclical companies which are the most economically sensitive. In November, materials, financials, and industrials have rallied 13% while energy surged nearly 34%. In the last month there have been the highest inflows into global equity funds since January 2018. The growth versus value investment debate is back in the forefront. There’s been a rotation from growth to value as investors look for stocks with upside when the pandemic ends.
The coronavirus infection and hospitalization rates continue to surge with 266,000 people dying with the virus in the US. More lockdowns and delays on additional stimulus and fiscal spending will undoubtedly put pressure on equity prices. New unemployment claims are worse than any time prior to the pandemic hitting the 1.1 million mark last week. The health of our economy and financial markets depends on a new round of economic stimulus and a successful rollout of the COVID-19 vaccines. Interest rates remained virtually unchanged for the week with the yield of the 10 year US Treasury ending at 0.84%. The price of US crude soared 7% to $45.38 per barrel benefiting from the improved outlook for demand.
We expect markets to be choppy with tax loss harvesting and momentum stock profit taking to hinge on investors and traders reacting to COVID and stimulus news. Please remain diversified and stay in-line with your long term investment goals. There will be more important economic news this week with Federal Reserve comments and reports on pending home sales and the unemployment rate.
Stay safe!
“Appreciation is a wonderful thing. It makes what is excellent in others belong to us as well.” – Voltaire