Author: Ryan Frydenlund

Ryan Frydenlund

Financial News and Portfolio Management Discussion through September 26th

US stocks fell for a fourth straight week led by concern over the economy and a global increase in virus infections. The S&P 500 fell 0.6% and the Dow sank 1.7% for the week.  Abroad, the FTSE All World Ex US dropped 4.1% for the week.  The yield on the 10-year Treasury edged eased over the week to settle at 0.66%, its lowest level since mid-August.

Sales of previously owned homes rose 2.4% in August. Home purchases reached a 14 year high.

US purchasing manager surveys showed manufacturing and service sector activity continued to expand in September though at a slower pace than in August.

Purchasing managers in Germany, France and Japan showed the flare ups of coronavirus cases were cooling service sector activity in Europe and Asia.

Initial jobless claims held steady over the past week at just under 900,000.

US durable goods orders rose 0.4% in August, lower than projected.

Financial News and Portfolio Management Discussion through September 19th

US stocks fell for a third straight week led by tech firms. The S&P 500 fell 0.6% and the Dow was flat for the week.  Abroad, the FTSE All World Ex US gained 1.0% for the week.  The yield on the 10-year Treasury edged up over the week to settle at 0.69%.

China’s retail sales recovered to prepandemic levels.  In addition, factory production, investment and property activity all gained pace.

US retail sales rose 0.6% in August, but at a slower pace than earlier in the summer.

The Fed left interest rates unchanged after its meeting and said it planned to keep interest rates near zero through 2023.  It would keep rates near zero until the economy is close to full employment and inflation “is on track to moderately exceed 2% for some time.”  They also increased their GDP estimate for the year expecting a 3.7% decline up from the 6.5% decline forecasted in June.

Initial jobless claims held nearly steady from a week before with 860,000 new filers.

US consumer sentiment rose more than expected in early September.

Analysts estimate that third quarter earnings will fall 22% from the third quarter last year.

Financial News and Portfolio Management Discussion through September 12th

US stocks posted another down week again led by declines in tech stocks.  The Nasdaq has fallen 10% from its high hit on 9/2.  The S&P 500 fell 2.5% and the Dow sank 1.7% for the week.  Abroad, the FTSE All World Ex US was flat for the week.  Oil ended the week near its lowest level in two months.  The yield on the 10-year Treasury ticked down over the week to settle at 0.67% as investors moved to safe havens.

Tesla was not picked to be added to the S&P 500 sending its shares falling.

First time unemployment claims stayed at the same level as the prior week, 884,000. Continuing unemployment claims increased to 13.4 million.

The UK grew 6.6% in July from June, but grew at an 8.7% rate in June from May.  Economists don’t project the British economy to regain its pre-pandemic size until 2022.

The Atlanta Fed projects the US will post 7% growth in the third quarter and not recover to pre-pandemic levels until early 2022.

August Market Commentary

Market Commentary

US stocks soared over the month, surpassing their mid-February level, to post new records highs. The jump was driven by similar themes including fiscal and monetary stimulus, positive news on a vaccine, and better than expected economic readings.  US Stocks have now gained for five straight months.  With all S&P 500 companies reporting second quarter earnings, 84% topped earnings estimates and 65% outpaced revenue projections by analysts. There are currently multiple vaccines in later stages of testing that have shown promise. The US economy continued to improve over the month.  Employers added 1.8 million jobs in July and the unemployment rate fell to 10.2%.  New claims for unemployment insurance continued to decline over the month, albeit at a slower rate.  The number of people receiving unemployment benefits has dropped to the lowest level since April, 14.8 million.  Manufacturing expanded in July at a faster rate than expected and retail sales rose, surpassing the retail spending level before the pandemic.  Sales of previously owned homes rose 24.7% in July over June.  It was the strongest monthly gain ever recorded and the highest monthly sales pace since December 2006.

Foreign stocks rose in August as well on improving economic numbers, monetary stimulus, and positive news on a vaccine. Second quarter growth results showed how significant an impact COVID-19 had as Germany contracted by 10%, Italy 12%, France 14%, Spain 19%, and the UK 20.4%.  Comparably, the US contracted 10%.  Manufacturing surveys in Europe and Japan posted strong gains in July.  Inflation contracted in Europe in August leading many to believe the European Central Bank will seek to take new stimulus efforts.  China posted a 9.5% increase in exports and improved manufacturing results as the country continues to rebound. Emerging markets trailed developed markets in August, but have outpaced developed markets for the year to date.

Bonds posted their first down month since March as interest rates rose.  In the Fed’s July meeting minutes, officials expressed concern over the economy and its continued recovery.  They believed additional support was needed for the economy from both the government and the Fed.  However, they didn’t come to any conclusions on what support they would provide or when that would occur. They also approved a significant change in how they manage inflation.  They will no longer proactively raise the Fed Funds rate to head off higher inflation and instead allow it to remain higher than their 2% target if inflation runs below 2% for a period of time.  It will seek to target an average inflation rate of 2%.  The move likely means interest rates will remain lower for longer.  The 10-year Treasury yield reached its highest level since mid-June ending the month at 0.72%, up from 0.55% to start August.  For the month, credit and agency bonds were the top performers with shorter term maturities outpacing longer term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.

 

Index PerformanceAugustYTDTrl. 1 Yr.
US Stocks (Russell 3000)7.24%9.39%21.44%
Foreign Stocks (FTSE AW ex US)4.44%-2.62%9.08%
US Bond Mkt. (BBgBarc Int. Gov/Cred)-0.12%5.94%5.95%
Municipal Bonds (BBgBarc 1-10 Yr Muni)-0.14%3.01%3.16%
Cash (ICE BofA ML 3-Mo T-Bill)0.01%0.62%1.26%

There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.  Source: Morningstar, Inc.

Financial News and Portfolio Management Discussion through September 5th

US stocks broke a five week winning streak driven by a sudden decline in tech stocks.  The S&P 500 fell 2.3% and the Dow dropped 1.8% for the week.  Abroad, the FTSE All World Ex US was down 0.5% for the week.  The yield on the 10-year Treasury fell over the week to settle at 0.69% as investors moved to safe havens.

Employers hired 1.4 million individuals in August and the unemployment rate dropped to 8.4% from 10.2% in July, topping expectations.

Weekly initial unemployment claims fell to 881,000 for the past week the lowest level since mid-March.  The number of people receiving unemployment benefits dropped to 13.3 million.

US factory output grew in August at the fastest pace since November 2018.  China and Germany also posted an acceleration of growth in manufacturing in August.