Monthly Market Insights | September 2020

U.S. Markets

Stock prices surged in August as investors cheered positive news of a potential COVID-19 treatment and welcomed a month-long succession of upbeat economic data.

The Dow Jones Industrial Average rose 7.57 percent, the Standard & Poor’s 500 Index climbed 7.01 percent, and the Nasdaq Composite soared 9.59 percent.1

You’ve got to get up every morning with determination if you are going to go to bed with satisfaction. George Lorimer, American journalist, author, and publisher

Solid Foundation

The month’s foundation was set by a series of strong economic reports, including an increase in manufacturing activity, better-than-anticipated factory orders, and a lessening of new jobless claims.2,3,4

Notching Highs

The S&P 500 index finally broke through resistance, ending the third week of August at a record high and completing the fastest bear market recovery in history. The Nasdaq Composite, having set multiple record highs during the same week, also ended the month at a record high.5,6

Strong Close to the Month

The final full week of trading was remarkable. Investors were encouraged by news of a potential COVID-19 treatment and a report suggesting U.S. and China negotiators had met to discuss trade issues. Stocks pushed higher still following announcement of the Fed’s inflation policy shift, suggesting that interest rates may remain low for longer than expected.

Sector Scorecard

The majority of industry sectors closed higher in August, with gains in Communication Services (+12.02 percent), Consumer Discretionary (+11.48 percent), Consumer Staples (+4.95 percent), Financials (+5.62 percent), Health Care (+2.11 percent), Industrials (+9.98 percent), Materials (+4.89 percent), Real Estate (+1.81 percent), and Technology (+16.62 percent). Energy (-1.27 percent) and Utilities (-2.28 percent) lost ground.7

U.S. Market Recap for August 2020
S&P 500 7.01% Month ‌ 8.34% Year-to-Date	Nasdaq 9.59% Month ‌ 31.24% Year-to-Date	Russell 1000 7.17% Month ‌ 11.77% Year-to-Date	10-Year Treasury 0.69% Month ‌ -1.23% Year-to-Date
Yahoo Finance, August 31, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. U.S. Treasury Notes are guaranteed by the federal government as to the timely payment of principal and interest. However, if you sell a Treasury Note prior to maturity, it may be worth more or less than the original price paid.

What Investors May Be Talking About in September

The election season is moving into high gear as November draws near. Will uncertainty about the elections be reflected in the stock market?

Since 1992, the S&P 500 has lost an average of 2 percent in the three months leading up to the presidential election but has been higher 43 percent of the time.8

Keep in mind that the 2 percent average includes the 20 percent drop prior to the 2008 election that was the result of the ongoing credit crisis.9

While past performance is no guarantee of future results, the lesson may be evident: Prepare for some short-term volatility, without losing sight of your overall investment strategy.

World Markets

Markets overseas generally trended higher with the MSCI-EAFE Index rising 4.98 percent in August.10

European markets rose on hopes of a COVID-19 vaccine and another round of economic stimulus. Major markets ended higher, with France gaining 3.42 percent and Germany advancing 5.13 percent. The U.K. lagged a bit, tacking on just 0.70 percent.11

Pacific Rim stocks turned higher, with Australia picking up 2.24 percent and Hong Kong climbing 2.37 percent. Japan had a strong showing, adding 6.59 percent.12

World Market Recap for August 2020
Emerging Markets	August	Year-to-Date
Hang Seng (China)	2.37%	-10.69%
Kospi (Korea)	3.41%	5.85%
Nikkei (Japan)	6.59%	-2.18%
Sensex (India)	2.72%	-6.36%
Jakarta Composite (Indonesia)	1.73%	-16.84%
Bovespa (Brazil)	-3.44%	-14.31%
IPC All-Share (Mexico)	-0.48%	-15.39%
Merval (Argentina)	-5.20%	12.39%
ASX 200 (Australia)	2.24%	-9.33%
Europe
DAX (Germany)	5.13%	-2.29%
CAC 40 (France)	3.42%	-17.24%
Dow Jones Russia Index (Russia)	1.96%	-18.74%
FTSE 100 (United Kingdom)	0.70%	-20.92%
Yahoo Finance, August 31, 2020. The market indexes discussed are unmanaged and generally considered representative of their respective markets. Individuals cannot directly invest in unmanaged indexes. Past performance does not guarantee future results. International investments carry additional risks, which include differences in financial reporting standards, currency exchange rates, political risks unique to a specific country, foreign taxes and regulations, and the potential for illiquid markets. These factors may result in greater share price volatility.

Indicators

Gross Domestic Product (GDP)

Second-quarter GDP contraction was revised from 32.9 percent to 31.7 percent.13

Employment

The labor market continued to improve, albeit at a slower pace. Employers added 1.8 million jobs in July, and the unemployment rate fell to 10.2 percent.14

Retail Sales

Consumer spending rose a lower-than-expected 1.2 percent in July. Slower sales of electronics and appliances were offset by an increase in restaurant and bar sales.15

Industrial Production

Output by the nation’s manufacturers, miners, and utilities rose 3.0 percent. To put that number in perspective, industrial production hit 8.4 percent in February.16

Housing

Housing starts surged in July, increasing by 22.6 percent.17

Existing home sales soared 24.7 percent, representing the biggest monthly gain since 1968, when tracking of existing home sales began.18

New home sales jumped by 13.9 percent, reaching their highest level in over 13 years.19

Consumer Price Index

Prices of consumer goods rose 0.6 percent in July, with gasoline prices contributing to the increase.20

Durable Goods Orders

Orders for products designed to last three years or longer gained 11.3 percent, rising for the third consecutive month, as defense aircraft and motor vehicle orders led the way.21

The Fed

Minutes from July’s meeting were released on August 19.

The Federal Open Market Committee (FOMC) appeared to favor more monetary accommodation, though Fed officials were unclear as to the timing or triggers for taking further policy action.

In a prepared statement, the FOMC said, “The path of the economy would depend significantly on the course of the virus.”

In addition, FOMC members believe that the “...ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term...” causing members to maintain the target range for the federal funds rate at 0 to ¼ percent.22

By the Numbers: Harvest Foods