Commentary provided by John Packs, Senior Investment Officer, AIG Retirement Services
Weekly Market Performance Snapshot (Week ending September 11, 2020 & Year-to-Date)
- Dow Jones Industrial Average®: -1.7% / -2.8%
- S&P 500® Index: -2.5% / +3.4%
- NASDAQ Composite® Index: -4.1% / +21.0%
- Russell 2000® Index: -2.5% / -10.2%
- 10-year U.S. Treasury note yield: 0.667%, down 5.1 basis points from 0.718% on September 4 and down 125 basis points from 1.92% on December 31, 2019
- Best-performing S&P 500 sector this week: Materials, +0.8%
- Weakest-performing S&P 500 sector this week: Energy, -6.4%
Past performance is not a guarantee of future results.
Topsy-Turvy Week for Equities
Stocks continued their sell-off when markets reopened after the Labor Day holiday. Big technology names suffered some of the sharpest losses, driving all indices lower Tuesday. Buyers stepped in to help equities recover some of their ground mid-week, but the markets couldn’t gain much traction heading into the weekend.
- The technology-heavy NASDAQ Composite suffered its worst week since March. The index went into correction territory, ending the week about 10% below its most recent peak on September 2. It is still 58% higher than March’s market trough.
- News that AstraZeneca paused its Phase 3 coronavirus vaccine trial because a participant became seriously ill weighed on market sentiment. It’s unclear how high a hurdle the pause presents, but it is a reminder that the search for a vaccine is difficult and uncertain. In the meantime, other companies’ trials continue.
- Weekly initial jobless claims came in at the same level as the prior week—884,000—while continuing claims ticked up. The numbers reaffirmed that the employment recovery has lost some of the momentum from earlier this summer.
- The Senate Republicans’ slimmed-down coronavirus relief bill failed to pass. The lack of agreement between Congress and the White House doesn’t seem to have rattled markets yet, but we may see a negative reaction if markets begin to think there won’t be any additional stimulus.
- The recent market dip is a reminder that markets are still volatile and will likely stay this way as long as questions remain about future economic activity. Speak with a financial professional about how to position your portfolio for the uncertain times ahead.
November Elections Increase Market Uncertainty
We’re less than two months from Election Day, with control of the White House and both houses of Congress up for grabs. The outcomes are far from clear and could be consequential to our economic future. The uncertainty arising from the elections and potential changes in policy will generate some turbulence in markets, as investors employ strategies to prepare for various scenarios.
- While markets often try to determine the policy implications of each candidate’s victory, COVID-19 adds an extra layer of complexity. The winner of this year’s presidential election will have to confront three unique challenges in January: the public health battle against COVID-19; the economic and employment repercussions of COVID-19; and the additional debt that’s been added as a result of supporting the economy through COVID-19. Success in dealing with these challenges will have a significant impact on the progress of any broader policy agenda.
- Additional uncertainty may develop if election results aren’t clear-cut on election night. A record number of mail-in ballots are expected because of COVID-19, and states have different timelines for counting these ballots. Days or weeks of uncertainty surrounding the outcomes—and reports and rumors arising about the counting process—could increase market volatility.
- Investors should be fully prepared to deal with increased volatility up to, and potentially through, the election. Even after the recent sell-off, major indices are still much closer to their record highs than their March lows. Investors should strongly consider these factors, among others, in positioning their portfolio to match their personal circumstances and investment objectives.