Category: Monthly Commentary

Monthly Commentary

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.

July Market Commentary

Market Commentary

US stocks continued to surge in July on fiscal stimulus hopes, better than expected corporate earnings, optimism over business reopenings, and positive economic news.  Stocks gained despite climbing infection rates in many states.  US Stocks posted their best four month percentage gain since December 1998.  Negotiations in Washington are ongoing over another economic relief bill that would continue unemployment benefits for millions of Americans.  With over 40% of S&P 500 companies reporting earnings to date they have posted a decline of 41%, but with 79% topping forecasts.  Illustrating the massive and unprecedented impact of COVID-19, US GDP contracted at a 32.9% rate in the second quarter. However, there were positive economic signs during the month with the unemployment rate dropping to 11.1% in June and the economy adding 4.8 million jobs.  New claims for unemployment insurance fell earlier in the month, but plateaued to end the month.  US retail sales topped expectations again gaining 7.5% and US manufacturing activity began to grow.  Sales of previously owned homes rose 20.7% in June, the biggest monthly gain on record, but remains 11.3% below from a year earlier.  Gold ended the month at a new all time high of $1,963 a troy ounce.

Foreign stocks climbed over the month on improving economic numbers and additional fiscal stimulus.  July saw improving manufacturing numbers in Europe and Asia.  Eurozone retail sales topped expectations and German factory orders surged 10.4%.  EU leaders reached an agreement on an $859 billion stimulus measure and the country bloc will issue its first ever common debt.  The agreement now must be approved by the governments of each member country.  China was the first major economy to post growth after the pandemic rising 3.2% in the second quarter.  Emerging markets have outpaced developed markets for the month and the year to date.

Bonds continued to climb in July as interest rates ticked down.  Interest rates eased over concern of the pace of the economic recovery and continued support from the Fed.  The Fed concluded their July policy meeting saying they would continue to hold the Fed Funds rate near zero through at least 2022 and increase their holdings of Treasuries and other securities. They extended all their emergency lending programs by three months to the end of the year to help support the economy.  The 10-year Treasury yield fell over the month ending at 0.54%, down from 0.66% to start July and down significantly from the start of the year.  For the month, credit bonds were the top performers with longer term maturities outpacing short term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.

Index PerformanceJulyYTDTrl. 1 Yr.
US Stocks (Russell 3000)5.68%2.01%10.93%
Foreign Stocks (FTSE AW ex US)4.36%-6.76%1.35%
US Bond Mkt. (BBgBarc Int. Gov/Cred)0.75%6.06%7.95%
Municipal Bonds (BBgBarc 1-10 Yr Muni)1.08%3.16%4.02%
Cash (ICE BofA ML 3-Mo T-Bill)0.02%0.50%1.30%

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.

June Market Commentary

US stocks’ recovery continued in June as optimism over business reopenings remained high and economic news topped expectations. US stocks posted their best quarterly performance since 1998 as all states opened up for business to some degree in June. For the quarter, the Fed’s moves and stimulus measures by the US government provided support for US stocks.  Economic news began to improve despite the US officially entering a recession beginning in February.  While new claims for unemployment insurance remain high, employers added 2.5 million jobs in May, the most on record, significantly better than the further job losses expected. The unemployment rate fell from 14.7% in April to 13.3% in May.  US retail sales soared 17.7%, significantly outpacing expectations, and new homes sales jumped 21% in May.  Us manufacturing output continued to contract, but at a slower pace and purchasing manager surveys showed global business activity had slower declines in May suggesting the recent economic weakness could be bottoming out.

Foreign stocks were the top performing asset class in June and posted their best quarter in nearly 10 years driven by the loosening of lockdowns, improving economic numbers, and central bank support.  Providing a glimpse of the trough of economic performance brought on by the virus, the UK said April GDP was down 25% from a year earlier.  The European Central Bank (ECB) significantly increased its bond buying program to $1.52 trillion, moving it more in line with the Fed.  EU officials are still negotiating on a $2 trillion coronavirus response plan, but most European countries have fully reopened and have not seen a new surge in cases.  Oil continued to rebound, rising 10.6% over the month to finish at $39.27 a barrel driven by OPEC production cuts as well as reduced production in the US.  China continues to bounce back from Covid-19 with manufacturing activity and the service sector showing growth in May.  Emerging markets have outpaced developed markets for June, the second quarter, and the year to date.

Bonds rose in June as interest rates remained flat.  After the Fed’s June meeting they stated they planned to not raise interest rates through 2022 and they will continue their current pace of Treasury and mortgage backed security purchases.  The Fed also announced during the month they were expanding the municipalities allowed to borrow directly from the Fed’s lending program and it would expand its bond buying program to include debt from individual companies.  Since the virus began significantly impacting the US, the Fed has implemented nine different emergency lending programs to support the economy.  The 10-year Treasury yield was flat over the month ending at 0.66%, only down slightly from 0.70% where it started the second quarter.  However, it has declined significantly from 1.92% to start the year.  For the month and quarter, credit bonds were the top performers with longer term maturities outpacing short term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.

Index Performance  June2QYTDTrl. 1 Yr.
US Stock (Russell 3000)2.29%22.03%-3.48%6.53%
Foreign Stock (FTSE AW ex US)4.48%16.56%-10.65%-3.99%
US Bond Mkt. (BarCap Int. Gov/Credit)0.62%2.81%5.28%7.12%
Municipal Bonds (BarCap 1-10yr Muni)0.39%2.68%2.06%3.65%
Cash (ICE ML 3Month T-Bill)0.01%0.02%0.60%1.63%

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.

 

May Market Commentary

In May US stocks continued to rebound driven by optimism over businesses reopening and the potential for vaccines.  Many states began to roll back their restrictions on business with all states expected to be open by early June.  Currently, there are more than 10 different vaccines that have shown promise and are going through various levels of testing, driving investors hopes that prevention from the virus could exist as soon as early next year.  With nearly all S&P 500 companies reporting earnings, 64% posted earnings that topped estimates, however, earnings as a whole fell 14.6% for the quarter.  Economic news was rough in May, but economists hope that the numbers posted reflect the economy at or near the bottom.  There were 20.5 million job losses in April and the unemployment rate surged to a high last seen during the depression at 14.7%.  Initial jobless claims filed since mid-March reached 38 million in mid-May.  However, near the end of the month, the total number of workers receiving unemployment benefits declined for the first time since February.  US retail sales fell 16.4% and manufacturing output dropped 13.7% in April.  Both were records.  First quarter GDP was revised down to a 5% contraction.  On the positive side, purchasing manager surveys showed global business activity had slower declines in May, and consumer sentiment in May improved over April.  For the month, US stocks climbed 5.35% and are now only down 5.63% for the year to date.

Foreign stocks gained as well in May driven by the loosening of lockdowns and stimulative measures.  EU officials projected that the region would suffer “a recession of historic proportions this year” due to the pandemic.  Germany fell into recession in the first quarter with GDP dropping 8.6%.  It was the second fastest rate of contraction since reunification.  France, Italy, and Spain posted GDP declines of 21.4%, 17.7%, and 19.4%, respectively. As a result, the EU is working on a $2 trillion coronavirus response plan that would significantly deepen the country bloc’s economic union. Japan moved into recession in the first quarter when its GDP contracted 3.4%.  Oil surged over the month, rising 88% to finish at $35.49 a barrel on improved demand and production cuts.  China has shown some gains since lifting its lockdown with industrial output improving, but retail sales remain weak. China elected for the first time in 25 years to not list a GDP growth target for 2020.  China’s central bank said it would continue to roll out measures to support its economy and be flexible with its monetary policy.  Emerging markets trailed developed markets over the month and year to date.  Foreign stocks rose 3.62% in May, but are still down 14.48% over the year to date.

Bonds gained in May as interest rates were steady.  Fed chief Powell said in congressional testimony the Fed would use “its full range of tools to support the economy” and that further fiscal stimulus was likely needed to help support the economy.  Comments made by Fed Governors make it unlikely the Fed would use negative interest rates as a monetary tool.  The 10-year Treasury yield was essentially flat over the month ending at 0.65%.  For the month, muni and credit bonds were the top performers with longer term maturities outpacing short term maturities. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.  In May, the US bond market rose 0.76% and has gained 4.63% over the year.

 

 

Index Performance  MayYTDTrl. 1 Yr.
US Stock (Russell 3000)5.35%-5.63%11.46%
Foreign Stock (FTSE AW ex US)3.62%-14.48%-2.67%
US Bond Mkt. (BarCap Int. Gov/Credit)0.76%4.63%7.60%
Municipal Bonds (BarCap 1-10yr Muni)2.48%1.65%3.69%
Cash (ICE ML 3Month T-Bill)0.00%0.58%1.84%

 

April Market Commentary

In April US stocks posted their best month since 1987 as stocks rebounded off their March lows supported by interventions from the Federal Government, the Federal Reserve, and optimism over the easing of lockdowns.  A new $484 billion deal was reached in Congress to aid small businesses and hospitals.  The majority of the funds will go towards replenishing the Paycheck Protection Plan and the Economic Injury and Disaster Loan funds that were quickly loaned out from the CARES Act.  Economic news started to reflect the impact of the shutdown of the economy.  There were 701,000 jobs cut in March and the unemployment rate moved from 3.5% in February to 4.4% in March, however, due to the timing of the reading the results don’t reflect the full extent of recent job cuts.  Since mid-March, more than 30 million people have filed for unemployment benefits.  US retail sales fell a record of 8.7% in March.  Factory and business activity and auto sales all saw a significant contraction in March.  First quarter GDP posted its fastest decline since the Financial Crisis falling 4.8%, more than projected.  For the month, US stocks surged 13.24%, but remain down 10.42% for the year to date.

Foreign stocks bounced back as well in April driven by monetary and fiscal stimulus measures as well as an easing of lockdowns.  To fight the impact of the virus on Europe, the EU reached an agreement on a $590 billion coronavirus relief bill.  The European Central Bank announced it would buy $820 billion of European government bonds.  These steps were taken as the lockdown of the region was showing its effects.  Factory activity and the service sector plunged in Europe and the Eurozone posted its largest quarterly decline of GDP ever, falling 14.4%.  The Bank of Japan said it would nearly triple its holdings of corporate debt to help support the Japanese economy.  The US, Saudi Arabia, and Russia reached an agreement for the 23 major oil producing countries around the world to cut oil production by 9.7 million barrels a day to help support the price of oil.  However, oil experienced extreme volatility over the month with the current month’s futures contract falling below zero at one point during the month before oil ended down 8% at $18.84 a barrel.  China contracted 6.8% in the first quarter, the first ever decline in growth for the country since the data was first tracked in 1992.  However, the decline was better than the 8.3% projected as business activity improved and the bank of China implemented additional stimulus measures.    Emerging markets have topped developed markets over the month and year to date.  Foreign stocks jumped 7.67% in April, but have declined 17.47% over the year to date.

Bonds climbed in April as interest rates edged down and Fed intervention helped ease volatility.  The Fed announced a new $2.3 trillion loan program supporting small and midsize businesses, municipalities, and riskier types of debt that had been previously excluded.  They also said they were prepared to expand that program if needed to prevent long lasting damage to the US economy.  After their meeting at the end of April, the Fed stated that it will use “its full range of tools to support the US economy in this challenging time.” They also called on the federal government to take on additional stimulus actions.  The 10-year Treasury yield edged down slightly over the month to end at 0.64%, down from 0.70% to start the month.  For the month, credit bonds were the top performer with longer term maturities performing the best. Over the year to date, it was US government bonds leading the way with longer maturities outpacing.  Muni bonds were down over the month over concerns of how the lockdowns would impact state and local revenues.  In April, the US bond market rose 1.41% and has gained 3.84% over the year.

 

Index Performance  AprilYTDTrl. 1 Yr.
US Stock (Russell 3000)13.24%-10.42%-1.04%
Foreign Stock (FTSE AW ex US)7.67%-17.47%-10.91%
US Bond Mkt. (BarCap Int. Gov/Credit)1.41%3.84%8.18%
Municipal Bonds (BarCap 1-10yr Muni)-0.19%-0.80%2.21%
Cash (ICE ML 3Month T-Bill)0.01%0.58%2.07%