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Weekly Economic and Stock Market Commentary – October 5, 2020


As for the stock market specifically:  

“October is the worst month to invest except for November, December, and the rest of the other months,” according to Mark Twain.

For those of you who have been reading this commentary for a long time, the answer is I do not get tired of writing that line, although I am sure I misquote it from time to time.

The markets made gains overall last week, which came after four consecutive weeks of losses for the S & P 500 and DJIA. In a nutshell, September was September.

The good news is that the losses of September did not remove the entirety of the gains of August.

Fate threw yet another curve ball to investors (as if there haven’t been a multitude of freak events this year) with news of the President being hospitalized.

My next sentence is apolitical as I don’t care how you vote (of course if you vote as I do, you are smart, and if you vote the other way, I am smart 😉 ).

I found the play-by-play of the Friday helicopter flight to be a spectacle, and could have been covered in a more dignified manner.

Many years ago I wrote a letter I titled the Litany of Babble, in which a member of my field gave “explanations” as to why the stock market declined. In that letter, the explanation was due to some news event, and each pair of explanations contradicted the other reason – the Federal Reserve raised interest rates, the Federal Reserve lowered interest rates and so-on.

I bring that up because last week each candidate said the stock market was up Thursday because they won the debate last week. Both sides were silent Friday when the stock market declined.

The market turned in good news at both the headline level, and with the bullish percent risk tools. All gained at least 3 percentage points last week, but not enough to change my recommendation of WEALTH PRESERVATION.

Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.

Below is where our indicators stand as of October 2, 2020 (Courtesy Dorsey, Wright, and Associates).

On a general note: 

The Department of Labor released the last unemployment report prior to the election. The US economy added 661,000 jobs in September. This was below the anticipated 850,000 new jobs. However, the revisions for August and September showed an additional 145,000 over the prior numbers. The unemployment rate fell to 7.9%. The economy regained slightly more than half the jobs lost in March and April.

The Commerce Department provided the Gross Domestic Product report for 2nd quarter. They told us the economy did a little better than anticipated at the beginning of the government shutdowns. The department noted the economy fell 31.4% as compared to the estimate of 31.7%. The first estimate of 3rd quarter GDP will come prior to the election.

There were continued negotiations early in the week regarding another stimulus package. The two sides appear to be about $750 billion dollars apart. There also is disagreement as to whether aid should go to those in the country illegally.

The S & P Core Logic Case-Schiller Home Price figures for July came out last week. The 20-city index saw prices rise 3.9% on a year-over-year basis, which is up from the June rise of 3.5%. The group said prices rose 0.6% from June to July. The national index showed an annual increase of 4.8%. In a related note, the Federal Housing Finance agency reported home prices experienced a record two-month price gain for April and May. That increase was more than 2 percent.

Questions? Want to know more? Email me at philip.rongo@ibexwealth.com.