Personal spending climbed 1.0% in August, though spending on services is still lagging. The trade deficit has widened in 2020, bucking the typical pattern from past recessions as the U.S. suffers a 10.1% decline in real GDP. U.S. equities have outperformed the global market since 2012 with large-caps leading the charge, but fixed income yields are continuing to disappoint. Is it time for corporate DB plans to consider GTAA as an alternative?
The State of Small Business, Employment Recovery Lags Previous Recessions, and a Look at Earnings Guidance
Economic reopenings are rolling on—NYC welcomes back indoor dining today—but small businesses are still struggling. 43% of those surveyed reported seeing revenue more than halved since the onset of the pandemic, and it’s being reflected in their employment numbers… which are very reminiscent of 2009. But how does the broader employment recovery stack up against previous recessions? Meanwhile, S&P 500 Index companies look to be feeling optimistic on the earnings front as we close out Q3, and October and November have historically been strong months for the index. With political tensions ratcheting ever-higher ahead of the election, will the trend continue?
Americans—particularly those with higher credit scores—are paying down credit card debt at a record pace in 2020, but could that spell trouble for consumer spending? Equity funds saw significant (re: $25 billion+) outflows last week in what could indicate weakening confidence in a rebound. Over in the bond market, high-yield funds also saw massive outflows last week, and bond indices have outperformed the S&P 500® Index year-to-date. But with rates at record lows, is the trend likely to continue?
VIX Futures Climb, Treasury Yields Hit Multi-Century Lows, and Are High-Yield Investors Poised to Get Hit?
While some employers are rehiring and the total number of people receiving unemployment benefits has ticked down, weekly new claims have yet to fall below 1 million since the onset of the pandemic. And as VIX futures climb on election nerves and news that the DOJ is seeking to weaken legal immunity for tech giants like Facebook and Google, tech remains positive month-to-date—even after recent losses. Finally, as yields creep ever lower to hit multi-century lows, junk bond sales have gone through the roof and set new records. Will investors get crushed by an approaching wave of corporate defaults that’s projected to surpass 2009?
As Fed Chair Jerome Powell and Treasury Secretary Steve Mnuchin’s testimony on the economic recovery continues today, we see that momentum is slowing—though the manufacturing sector is still showing signs of strength. Equities have also eased off the gas and appear to have hit a long-term resistance level—will it hold? Finally, though we might typically expect to see small caps outperform during this phase of the economic cycle, anemic earnings and historic leverage during the coronavirus era have contributed to ongoing weakness. Will the trend continue into 2021?
Momentum looks to be slowing for the economic recovery, though leading indicators still see growth on the horizon. While the housing market doesn’t look to be mirroring the days of the Great Recession, Hedge funds are revisiting a trend from the era and currently hold the largest net-short position in Nasdaq 100 futures since 2008—could it be a sign of trouble ahead for the recently battered index? And as commodity prices climb—with many possible indications—we’re again seeing how plummeting yields are forcing bond investors to take on more risk for less return.
Unemployment Ticks Down, Business Closures Rise, and Is a New Bubble On the Rise in Stock Valuations?
After climbing slightly through August, new unemployment claims ticked down last week. We’re far from out of the woods though as permanent business closures continue across the country. And as the Fed now intends to keep rates at historic lows through at least 2023, it may be time to move beyond traditional allocation methods like the 60/40 portfolio. Do you have an alternative in place?
Sometimes our industry grabs on to a concept and cannot let it go. Is September the worst month from a performance standpoint? Does it almost always go down? Should one avoid the markets in September? Let’s take a quick look.
Though manufacturing activity remains strong in New York, national growth fell below expectations last month as momentum slows in the face of natural disasters and the ongoing battle against the coronavirus. And while the big have certainly gotten bigger in the S&P 500® Index, do the new follow the same pattern? Finally, after a historic wave of asset purchases that effectively stabilized yields, the Fed is easing off the gas pedal. Will Chairman Powell reveal any significant new insights when he speaks this afternoon?
Consumer prices rose for the third straight month in August, bringing year-over-year CPI growth to 1.3%. Renters and homeowners alike are under growing pressure as cash grows tight and the looming threat of evictions and foreclosures grows stronger. And China’s market share climbs to capture over 40% of the emerging market equity index.