ND&S Weekly Commentary 9.28.20 – Markets Pull Back on an Uptick in COVID-19 Cases

September 29, 2020

Market volatility continued last week with equity markets pulling back for a fourth consecutive week. Equity markets made several attempts to rebound with investors’ hopes tied to another stimulus package. Complicating the outlook are an uptick in coronavirus cases in the U.S. and Europe, social unrest and the upcoming election season.

For the week, the S&P 500 declined 0.61% while the DJIA was down 1.75%. Foreign markets struggled on the week with developed markets, as measured by the MSCI EAFE index, falling 4.21% and emerging markets (MSCI EM) down 4.42% for the week. Fixed income, represented by the Bloomberg/Barclays Aggregate, finished the week slightly lower by 0.09%. The 10 YR US Treasury closed at a yield of 0.66%. Gold prices declined last week to $1,860/oz.

It was a quiet week for economic releases. On Tuesday, the IHS Markit Flash U.S. Composite Outlook PMI for September registered a reading of 54.4. Both U.S. manufacturing and services readings signified an expansion from the previous month. On Friday, new orders of manufactured durable goods increased 0.4% in August, which missed expectations. In congressional testimony last week, US Federal Reserve Chairman Jerome Powell said, “we remained committed to using our tools to do what we can, for as long as it takes, to ensure that the recovery will be as strong as possible, and to limit lasting damage to the economy.” Chair Powell also noted that, “economic activity has picked up from its depressed second-quarter level”. Interest rates are likely to remain low for the foreseeable future as a result of the monetary policy backdrop.

Equity markets have pulled back almost into correction territory during the month of September. We strongly believe that investors should stay diversified across a variety of asset classes with a slight defensive bias to long-term targets.

“The past always looks better than it was. It’s only pleasant because it isn’t here.”Finley Peter Dunne