Freedom Capital Management November Market Update (Click for full article)

Date: November 8, 2020

The VIX Index can provide information utilizing recent market volatility, option premiums, and an expectation for mean reversion, as an indication of where the VIX Index is currently priced compared to its average price range. Comparing the VIX Index level to its average price range is helpful in identifying whether VIX is “high” or “low” and can provide indications of what the market is predicting about future prices. Generally, a rising VIX indicates Market weakness and a declining VIX indicates the Market is strengthening. I always write about the VIX Index price in the Monthly Market Update. Looking at the chart below one can see when the Market was at its high in February the VIX Index was below 20. When the Coronavirus began accelerating the Market declined and the VIX Index climbed to a high of 85.47. The VIX has been at higher levels then average since the Coronavirus. The VIX Index is also referred as the Fear Index. The VIX Index will rise because of news events, economic events, during earnings season and during political events, such as the Presidential Election. Here is my observation, since election day the VIX Index has been declining and the Market has been rising, that is a good sign. I am will be watching to see if the ballot recount will push the XIV higher causing the Market to decline. I have tried to show the “VIX to Market” relationship on the charts below.

Chart, line chart

Description automatically generated

Chart, histogram

Description automatically generated

The top chart is the S&P 500 ETF (SPY), the chart below is the VIX Index. The pink channel at the bottom is the average range the VIX normally trades within. The VIX has been above the 20 average since 2/21/2020.

The VIX Index closed on Friday 11/6 at 24.86. That is the lowest it has been since 10/12. A declining VIX is bullish for the markets. A VIX below 15 is even more bullish.

Percent of stocks above their 50 day and 200 day moving average. 64% of stocks are above their 50-day moving average and 71% of the stocks are above their 200-day moving average. When 60% of stocks are above their 200-day moving average, that is very bullish.

Federal Reserve: The next FOMC meeting is on December 16, 2020. On November 5th the Federal Reserve voted unanimously to maintain the current interest rate.

Unemployment Rate: Total nonfarm payroll employment rose by 638,000 in October, and the unemployment rate declined to 6.9 percent, the U.S. Bureau of Labor Statistics reported on November 6th. In October, notable job gains occurred in leisure and hospitality, professional and business services, retail trade, and construction. Employment in government declined.

Inflation Rate: The annual inflation rate for the United States is 1.4% for the 12 months ended September 2020 as compared to 1.3% previously, according to U.S. Labor Department data published on October 13, 2020.

Overall, the market is bullish and we will be watching to see if the ballot recount will push the XIV higher causing the Market to decline.

In this month’s recap: Inaction on a second American fiscal stimulus bill and a rise in global COVID-19 cases put pressure on stock prices in October.

Monthly Economic Update

Presented by Guy Woolley, November 2020

U.S. Markets

Inaction on a second American fiscal stimulus bill and a rise in global COVID-19 cases put pressure on stock prices in October.

The Dow Jones Industrial Average, which has lagged much of the year, dropped 4.61 percent. The Standard & Poor’s 500 Index lost 2.77 percent and the Nasdaq Composite slipped 2.29 percent.1

All About Stimulus

The perceived progress by lawmakers to pass a new fiscal stimulus bill continued to move markets. When negotiations appeared to be on track, stocks moved higher but retreated as talks stalled.

Investor optimism regarding a second stimulus bill was highest at the start of the month, igniting strong gains as October got underway. Market sentiment was further buoyed by news of advances in COVID-19 treatments and a growing conviction that November’s election may be less contested than initially feared.

COVID’s Influence

As the month wore on, market optimism waned as the window to pass a stimulus bill closed. As hopes for a fiscal stimulus faded, an increase in new COVID-19 cases in the U.S. and Europe continued to sour market sentiment. This caused many investors to contemplate what a second coronavirus wave might do to the economic recovery.

Strong Earnings

Amid the attention the stimulus talks and COVID cases garnered, earnings season also began last month. By October 30th, with 64 percent of the S&P 500 companies having reported earnings, 86 percent had performed above Wall Street estimates and above the five-year average of 73 percent.2

These strong earnings results had little effect on a market overwhelmed by large-scale issues. Selling accelerated in the final week of trading with no movement on the fiscal stimulus bill, a bump up in COVID-related hospitalizations, and a reinstatement of partial lockdowns in Germany and France.

Sector Scorecard Pressure

Utilities (+5.05 percent) was the only sector to post a gain in October. Communication Services (-0.34 percent), Consumer Discretionary (-2.73 percent), Consumer Staples (-2.87 percent), Energy (-4.11 percent), Financials (-0.87 percent), Health Care (-3.62 percent), Industrials (-1.44 percent), Materials (-0.72 percent), Real Estate (-3.18 percent), and Technology (-5.00 percent) closed lower.3

What Investors May Be Talking About in November

The U.S. election will take center stage this month, with the critical concern being whether the election results will be clear and decisive.

Should President Trump remain in office, investors may expect him to follow similar policy initiatives during a second term. If former Vice President Biden is elected, investors will be listening closely to public statements and potential cabinet appointments to gain insight into his policy priorities.

Regardless of who is elected, the markets are expected to look for signs of a new stimulus measure.

T I P O F T H E M O N T H

Check your bank account regularly for fraud? If you don’t bank online – do you carefully check your monthly statements? If not, you should.

World Markets

A resurgence in COVID-19 infections, new economic lockdowns, and the growing prospect of a hard Brexit sent the MSCI-EAFE Index tumbling by 4.06 percent in October.4

Countries at the epicenter of the coronavirus resurgence in Europe were especially hard hit, with losses in Germany (-9.44 percent), France (-4. percent), Italy (-6.90 percent), and the U.K. (-4.92 percent).5

Pacific Rim stocks performed better, as Australia picked up 1.92 percent, and Hong Kong added 2.76 percent.6

Indicators

Gross Domestic Product: The economy expanded at a 33.1 percent annual rate in the third quarter, recouping about two-thirds of the pandemic-induced contraction suffered earlier in the year.7

Employment: Nonfarm payrolls grew by 661,000 in September. Hiring was slightly below expectations, but it was enough to drop the unemployment rate to 7.9 percent, down from the previous month’s 8.4 percent.8

Retail Sales: Consumer spending rose 1.9 percent, led by a 3.6 percent jump in motor vehicle sales. It was the fifth consecutive month of higher retail sales.9

Industrial Production: Industrial output fell 0.6 percent in September after four straight months of gains. Industrial production was 7.1 percent below its pre-pandemic February level.10

Housing: Housing starts rose 1.9 percent, as single-family home starts outweighed a decline in the more volatile multi-family segment.11

Existing home sales increased by 9.4 percent. Tight inventories drove the median home price higher to $311,800, a 14.8 percent jump from September 2019.12

After four straight months of increases, sales of new homes fell by 3.5 percent.13

Consumer Price Index: The cost of consumer goods rose by 0.2 percent in September, with a 6.7 percent jump in used cars and trucks. Additionally, inflation remained low, recording a 12-month increase of 1.4 percent.14

Durable Goods Orders: Orders for long-lasting goods rose 1.9 percent in September, the fifth consecutive month of increasing orders. Orders for nondefense capital goods, a proxy for business investment, went up by 1 percent.15

Q U O T E O F T H E M O N T H

“I have no special talents. I’m only passionately curious.

ALBERT EINSTeIN

The Fed

The minutes from September’s Federal Open Market Committee meeting reflected a Federal Reserve highly focused on the economy’s current state. Members expressed concerns about the lack of additional fiscal stimulus, and some suggested this stimulus gap could derail a full economic recovery.

Members supported providing forward guidance on the federal funds rate, which has a current target rate of between 0.00 and 0.25 percent. They also supported the new Federal Open Market Committee language, indicating inflation would have to average above 2 percent for a period of time before adjusting short-term rates would be considered.16

MARKET INDEX

Y-T-D CHANGE

October 2020

DJIA

-7.14

-4.61%

NASDAQ

21.61%

-2.29%

S&P 500

1.21%

-2.77%

     

BOND YIELD

Y-T-D

October 2020

10 YR TREASURY

-1.06%

0.86%

Sources: Yahoo Finance, October 31, 2020

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year Treasury real yield = projected return on investment, expressed as a percentage, on the U.S. government’s 10-year bond.

T H E M O N T H L Y R I D D L E

What is the significance of the following: The year is 1978, thirty-four minutes past noon on May 6th.

LAST MONTH’S RIDDLE: What is no sooner spoken than broken?

ANSWER: Silence.

Guy Woolley may be reached at 415-236-5364 or [email protected]
www.freedomcapitalmanagement.com

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

«RepresentativeEmailDisclosure»

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalization in the FTSE Developed Europe Index. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. Established in January 1980, the All Ordinaries is the oldest index of shares in Australia. It is made up of the share prices for 500 of the largest companies listed on the Australian Securities Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE TWSE Taiwan 50 Index is a capitalization-weighted index of stocks comprises 50 companies listed on the Taiwan Stock Exchange developed by Taiwan Stock Exchange in collaboration with FTSE. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

1. The Wall Street Journal, October 31, 2020

2. FactSet Research, October 30, 2020

3. FactSet Research, October 31, 2020

4. MSCI.com, October 31, 2020

5. MSCI.com, October 31, 2020

6. MSCI.com, October 31, 2020

7. The Wall Street Journal, October 29, 2020

8. The Wall Street Journal, October 2, 2020

9. The Wall Street Journal, October 16, 2020

10. The Wall Street Journal, October 16, 2020

11. CNBC.com, October 20, 2020

12. CNBC.com, October 22, 2020

13. Reuters.com, October 26, 2020

14. Reuters.com, October 13, 2020

15. The Wall Street Journal, October 27, 2020

16. CNBC.com, October 7, 2020

Date: November 8, 2020

The VIX Index can provide information utilizing recent market volatility, option premiums, and an expectation for mean reversion, as an indication of where the VIX Index is currently priced compared to its average price range. Comparing the VIX Index level to its average price range is helpful in identifying whether VIX is “high” or “low” and can provide indications of what the market is predicting about future prices. Generally, a rising VIX indicates Market weakness and a declining VIX indicates the Market is strengthening. I always write about the VIX Index price in the Monthly Market Update. Looking at the chart below one can see when the Market was at its high in February the VIX Index was below 20. When the Coronavirus began accelerating the Market declined and the VIX Index climbed to a high of 85.47. The VIX has been at higher levels then average since the Coronavirus. The VIX Index is also referred as the Fear Index. The VIX Index will rise because of news events, economic events, during earnings season and during political events, such as the Presidential Election. Here is my observation, since election day the VIX Index has been declining and the Market has been rising, that is a good sign. I am will be watching to see if the ballot recount will push the XIV higher causing the Market to decline. I have tried to show the “VIX to Market” relationship on the charts below.

Chart, line chart

Description automatically generated

Chart, histogram

Description automatically generated

The top chart is the S&P 500 ETF (SPY), the chart below is the VIX Index. The pink channel at the bottom is the average range the VIX normally trades within. The VIX has been above the 20 average since 2/21/2020.

The VIX Index closed on Friday 11/6 at 24.86. That is the lowest it has been since 10/12. A declining VIX is bullish for the markets. A VIX below 15 is even more bullish.

Percent of stocks above their 50 day and 200 day moving average. 64% of stocks are above their 50-day moving average and 71% of the stocks are above their 200-day moving average. When 60% of stocks are above their 200-day moving average, that is very bullish.

Federal Reserve: The next FOMC meeting is on December 16, 2020. On November 5th the Federal Reserve voted unanimously to maintain the current interest rate.

Unemployment Rate: Total nonfarm payroll employment rose by 638,000 in October, and the unemployment rate declined to 6.9 percent, the U.S. Bureau of Labor Statistics reported on November 6th. In October, notable job gains occurred in leisure and hospitality, professional and business services, retail trade, and construction. Employment in government declined.

Inflation Rate: The annual inflation rate for the United States is 1.4% for the 12 months ended September 2020 as compared to 1.3% previously, according to U.S. Labor Department data published on October 13, 2020.

Overall, the market is bullish and we will be watching to see if the ballot recount will push the XIV higher causing the Market to decline.

In this month’s recap: Inaction on a second American fiscal stimulus bill and a rise in global COVID-19 cases put pressure on stock prices in October.

Monthly Economic Update

Presented by Guy Woolley, November 2020

U.S. Markets

Inaction on a second American fiscal stimulus bill and a rise in global COVID-19 cases put pressure on stock prices in October.

The Dow Jones Industrial Average, which has lagged much of the year, dropped 4.61 percent. The Standard & Poor’s 500 Index lost 2.77 percent and the Nasdaq Composite slipped 2.29 percent.1

All About Stimulus

The perceived progress by lawmakers to pass a new fiscal stimulus bill continued to move markets. When negotiations appeared to be on track, stocks moved higher but retreated as talks stalled.

Investor optimism regarding a second stimulus bill was highest at the start of the month, igniting strong gains as October got underway. Market sentiment was further buoyed by news of advances in COVID-19 treatments and a growing conviction that November’s election may be less contested than initially feared.

COVID’s Influence

As the month wore on, market optimism waned as the window to pass a stimulus bill closed. As hopes for a fiscal stimulus faded, an increase in new COVID-19 cases in the U.S. and Europe continued to sour market sentiment. This caused many investors to contemplate what a second coronavirus wave might do to the economic recovery.

Strong Earnings

Amid the attention the stimulus talks and COVID cases garnered, earnings season also began last month. By October 30th, with 64 percent of the S&P 500 companies having reported earnings, 86 percent had performed above Wall Street estimates and above the five-year average of 73 percent.2

These strong earnings results had little effect on a market overwhelmed by large-scale issues. Selling accelerated in the final week of trading with no movement on the fiscal stimulus bill, a bump up in COVID-related hospitalizations, and a reinstatement of partial lockdowns in Germany and France.

Sector Scorecard Pressure

Utilities (+5.05 percent) was the only sector to post a gain in October. Communication Services (-0.34 percent), Consumer Discretionary (-2.73 percent), Consumer Staples (-2.87 percent), Energy (-4.11 percent), Financials (-0.87 percent), Health Care (-3.62 percent), Industrials (-1.44 percent), Materials (-0.72 percent), Real Estate (-3.18 percent), and Technology (-5.00 percent) closed lower.3

What Investors May Be Talking About in November

The U.S. election will take center stage this month, with the critical concern being whether the election results will be clear and decisive.

Should President Trump remain in office, investors may expect him to follow similar policy initiatives during a second term. If former Vice President Biden is elected, investors will be listening closely to public statements and potential cabinet appointments to gain insight into his policy priorities.

Regardless of who is elected, the markets are expected to look for signs of a new stimulus measure.

T I P O F T H E M O N T H

Check your bank account regularly for fraud? If you don’t bank online – do you carefully check your monthly statements? If not, you should.

World Markets

A resurgence in COVID-19 infections, new economic lockdowns, and the growing prospect of a hard Brexit sent the MSCI-EAFE Index tumbling by 4.06 percent in October.4

Countries at the epicenter of the coronavirus resurgence in Europe were especially hard hit, with losses in Germany (-9.44 percent), France (-4. percent), Italy (-6.90 percent), and the U.K. (-4.92 percent).5

Pacific Rim stocks performed better, as Australia picked up 1.92 percent, and Hong Kong added 2.76 percent.6

Indicators

Gross Domestic Product: The economy expanded at a 33.1 percent annual rate in the third quarter, recouping about two-thirds of the pandemic-induced contraction suffered earlier in the year.7

Employment: Nonfarm payrolls grew by 661,000 in September. Hiring was slightly below expectations, but it was enough to drop the unemployment rate to 7.9 percent, down from the previous month’s 8.4 percent.8

Retail Sales: Consumer spending rose 1.9 percent, led by a 3.6 percent jump in motor vehicle sales. It was the fifth consecutive month of higher retail sales.9

Industrial Production: Industrial output fell 0.6 percent in September after four straight months of gains. Industrial production was 7.1 percent below its pre-pandemic February level.10

Housing: Housing starts rose 1.9 percent, as single-family home starts outweighed a decline in the more volatile multi-family segment.11

Existing home sales increased by 9.4 percent. Tight inventories drove the median home price higher to $311,800, a 14.8 percent jump from September 2019.12

After four straight months of increases, sales of new homes fell by 3.5 percent.13

Consumer Price Index: The cost of consumer goods rose by 0.2 percent in September, with a 6.7 percent jump in used cars and trucks. Additionally, inflation remained low, recording a 12-month increase of 1.4 percent.14

Durable Goods Orders: Orders for long-lasting goods rose 1.9 percent in September, the fifth consecutive month of increasing orders. Orders for nondefense capital goods, a proxy for business investment, went up by 1 percent.15

Q U O T E O F T H E M O N T H

“I have no special talents. I’m only passionately curious.

ALBERT EINSTeIN

The Fed

The minutes from September’s Federal Open Market Committee meeting reflected a Federal Reserve highly focused on the economy’s current state. Members expressed concerns about the lack of additional fiscal stimulus, and some suggested this stimulus gap could derail a full economic recovery.

Members supported providing forward guidance on the federal funds rate, which has a current target rate of between 0.00 and 0.25 percent. They also supported the new Federal Open Market Committee language, indicating inflation would have to average above 2 percent for a period of time before adjusting short-term rates would be considered.16

MARKET INDEX

Y-T-D CHANGE

October 2020

DJIA

-7.14

-4.61%

NASDAQ

21.61%

-2.29%

S&P 500

1.21%

-2.77%

     

BOND YIELD

Y-T-D

October 2020

10 YR TREASURY

-1.06%

0.86%

Sources: Yahoo Finance, October 31, 2020

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year Treasury real yield = projected return on investment, expressed as a percentage, on the U.S. government’s 10-year bond.

T H E M O N T H L Y R I D D L E

What is the significance of the following: The year is 1978, thirty-four minutes past noon on May 6th.

LAST MONTH’S RIDDLE: What is no sooner spoken than broken?

ANSWER: Silence.

Guy Woolley may be reached at 415-236-5364 or [email protected]
www.freedomcapitalmanagement.com

Know someone who could use information like this?
Please feel free to send us their contact information via phone or email. (Don’t worry – we’ll request their permission before adding them to our mailing list.)

«RepresentativeEmailDisclosure»

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalization in the FTSE Developed Europe Index. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. Established in January 1980, the All Ordinaries is the oldest index of shares in Australia. It is made up of the share prices for 500 of the largest companies listed on the Australian Securities Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE TWSE Taiwan 50 Index is a capitalization-weighted index of stocks comprises 50 companies listed on the Taiwan Stock Exchange developed by Taiwan Stock Exchange in collaboration with FTSE. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

1. The Wall Street Journal, October 31, 2020

2. FactSet Research, October 30, 2020

3. FactSet Research, October 31, 2020

4. MSCI.com, October 31, 2020

5. MSCI.com, October 31, 2020

6. MSCI.com, October 31, 2020

7. The Wall Street Journal, October 29, 2020

8. The Wall Street Journal, October 2, 2020

9. The Wall Street Journal, October 16, 2020

10. The Wall Street Journal, October 16, 2020

11. CNBC.com, October 20, 2020

12. CNBC.com, October 22, 2020

13. Reuters.com, October 26, 2020

14. Reuters.com, October 13, 2020

15. The Wall Street Journal, October 27, 2020

16. CNBC.com, October 7, 2020

Freedom Capital Management October Market Update (Click for full Article)

Date: October 10, 2020

As I mentioned last month, “If the trend is broken and selling volume increases, I will trim positions to increase cash in the portfolios.” We were very close to that happening as you can see on the chart below. The orange line is the 50-Day moving average which the market fell below on September 17. It was trading in that area for six days before moving back above the green base line of the upward rising regression channel. The market found support and is now moving higher again. It looks as if it wants to get back to the all-time that the Nasdaq 100 EFT hit at 303.50 on September 2nd before the sell-off. With all that is happening in our country it is surprising that the markets are showing so much continued strength. Could the strength be due to the renewed hope for an additional stimulus package?

Graphical user interface, chart

Description automatically generated

The chart above is of the Nasdaq 100 Exchange Traded Fund, Symbol “QQQ”

The VIX Index closed at 25.00 on Friday, October 9. It is slightly lower than last month. As the VIX declines in value the markets tend to rise. As I mentioned last month, I expect the VIX to stay at higher levels until after the Presidential election.

Percent of stocks above their 50 day and 200 day moving average. 78% of stocks are above their 50-day moving average and 73% of stocks are above their 200-day moving average, which is higher than last month. The confirms the markets gaining strength. When 60% of the stocks are above their 200-day moving average, it is a bullish sign.

Federal Reserve: The next FOMC meeting is November 5, 2020.

Unemployment Rate: Total nonfarm payroll employment rose by 661,000 in September, and the unemployment rate declined to 7.9 percent, the U.S. Bureau of Labor Statistics reported October 2nd. These improvements in the labor market reflect the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it. In September, notable job gains occurred in leisure and hospitality, in retail trade, in health care and social assistance, and in professional and business services. Employment in government declined over the month, mainly in state and local government education.

Inflation Rate: The annual inflation rate for the United States is 1.3% for the 12 months ended August 2020 as compared to 1.0% previously, according to U.S. Labor Department data published on September 11, 2020. The next inflation update is scheduled for release on October 13.

Overall, the markets gained some strength from the recent lows and are looking to move back to the recent highs set in early September.

In this month’s recap: Stocks dropped during the month as investors worried about stalled fiscal stimulus talks in Washington, the upcoming election, and new coronavirus cases in Europe.

Monthly Economic Update

Presented by Guy Woolley, October 2020

U.S. Markets

Stocks dropped in September as investors worried about stalled fiscal stimulus talks in Washington, the upcoming election, and new coronavirus cases in Europe.

The Dow Jones Industrial Average, which lagged this year slipped 2.28 percent. The Standard & Poor’s 500 Index lost 3.92 percent and the Nasdaq Composite declined 5.16 percent.1

Tech Stocks Under Pressure

After a strong rally in August, investor sentiment quickly turned negative as technology stocks dragged down the overall market.

The retreat in the technology sector gathered steam as the month wore on, sending the tech-heavy Nasdaq Composite into correction territory over a three-day span following a recent record high. A correction is defined as a decline of at least 10 percent but not more than 20 percent from a recent high.2

A Few Bright Spots

The month did offer moments of optimism, however, that sparked brief rallies, such as an increase in merger and acquisition deals and further reported progress on a COVID-19 vaccine. However, concerns about the November election, the fading hopes for a fiscal stimulus bill, and an increase in European COVID-19 cases weighed heavily on investor sentiment.

As September came to a close, the market cut its losses, surging on the final two days of trading as legislators appeared to reopen fiscal stimulus talks.

Sector Scorecard

All 11 industry sectors were lower in September, with losses in Communication Services (−6.61 percent), Consumer Discretionary (−3.15 percent), Consumer Staples (−3.71 percent), Energy (−17.56 percent), Financials (−6.35 percent), Health Care (−3.87 percent), Industrials (−2.04 percent), Materials (−1.52 percent), Real Estate (−4.05 percent), Technology (−6.03 percent), and Utilities (−0.37 percent).3

What Investors May Be Talking About in October

The housing sector has been a bright spot in a challenging year and has seen strong consumer demand thanks to historically low interest rates.

Home building and home sales have set new records in recent months, while home builder confidence is at an all-time high. The National Association of Home Builders/Wells Fargo Housing Market Index posted a reading of 83 out of a possible 100 in September, well above its previous record high of 78.4,5

Housing accounts for 15 percent of the nation’s gross domestic product, so investors may watch for the sector to retain its momentum in the fourth quarter and into 2021.6

T I P O F T H E M O N T H

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World Markets

International markets struggled amid more coronavirus cases in Europe and concerns over the tensions between the U.S. and China.

The MSCI-EAFE Index fell 2.20 percent in September.7

European markets were broadly weaker. France dropped 2.91 percent, Germany lost 1.43 percent, and the U.K. slipped 1.68 percent.8

Pacific Rim stocks were mixed as Australia fell 4.04 percent and Hong Kong declined 6.82 percent. Japan notched a solid gain, tacking on 9.68 percent.9

Indicators

Gross Domestic Product: The final reading of the second-quarter GDP showed an annualized decline of 31.4 percent.10

Employment: The unemployment rate dropped to 8.4 percent as employers added 1.4 million jobs in August.11

Retail Sales: Retail sales growth slowed in August, rising only 0.6 percent as the supplemental unemployment benefits expired at the end of July. The benefits helped buyers in prior months.12

Industrial Production: Industrial output rose 0.4 percent, below economists’ expectations of a 1 percent increase.13

Housing: Housing starts fell 5.1 percent after sharp gains in the previous three months. Single-family home starts increased by 4.1 percent, but the overall result was dragged down by a 22.7 percent decline in multi-family starts.14

Existing home sales rose 2.4 percent from July and were 10.5 percent higher than August of last year.15

Sales of new homes rose to their highest level in almost 14 years, posting a 4.8 percent increase from the previous month.16

Consumer Price Index: Consumer prices jumped 0.4 percent in August, led by the sharpest increase in the cost of used cars and trucks in more than 50 years. On a year-over-year basis, inflation rose 1.3 percent.17

Durable Goods Orders: For the fourth straight month durable goods orders rose, increasing by 0.4 percent in August. New orders for nondefense capital goods, excluding aircraft, jumped 1.8 percent.18

Q U O T E O F T H E M O N T H

“Vision is the art of seeing things that are invisible to others.

JONATHAN SWIFT

The Fed

The Federal Reserve signaled that interest rates would likely not increase until 2023 following its two-day Federal Open Market Committee (FOMC) meeting that ended on September 16.19

Fed officials also stressed the importance of additional fiscal stimulus.19

Fed officials adjusted their outlook for unemployment, predicting it would average between 7 and 8 percent in the final three months of the year. Previously, Fed officials had expected unemployment of between 9 and 10 percent in the final calendar quarter of 2020.19

MARKET INDEX

Y-T-D CHANGE

September 2020

DJIA

-2.65%

-2.28%

NASDAQ

24.46%

-5.16%

S&P 500

4.09%

-3.92%

     

BOND YIELD

Y-T-D

September 2020

10 YR TREASURY

-1.24%

0.69%

Sources: Yahoo Finance, September 30, 2020

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year Treasury real yield = projected return on investment, expressed as a percentage, on the U.S. government’s 10-year bond.

T H E M O N T H L Y R I D D L E

What is no sooner spoken than broken?

LAST MONTH’S RIDDLE: Sally promised Kate today that she will tell Kate a big secret on the day before four days from the day after tomorrow. If today is Saturday the 13th, on what day and date will Sally tell Kate her big secret?

ANSWER: Thursday the 18th.

Guy Woolley may be reached at 415-236-5364 or [email protected]

www.freedomcapitalmanagement.com

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«Representative Disclosure»

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs, or expenses. Investors cannot invest directly in indices. All economic and performance data is historical and not indicative of future results. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is a market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor’s 500 (S&P 500) is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world’s largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. The SSE Composite Index is an index of all stocks (A shares and B shares) that are traded at the Shanghai Stock Exchange. The CAC-40 Index is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The FTSEurofirst 300 Index comprises the 300 largest companies ranked by market capitalisation in the FTSE Developed Europe Index. The FTSE 100 Index is a share index of the 100 companies listed on the London Stock Exchange with the highest market capitalization. Established in January 1980, the All Ordinaries is the oldest index of shares in Australia. It is made up of the share prices for 500 of the largest companies listed on the Australian Securities Exchange. The S&P/TSX Composite Index is an index of the stock (equity) prices of the largest companies on the Toronto Stock Exchange (TSX) as measured by market capitalization. The Hang Seng Index is a free float-adjusted market capitalization-weighted stock market index that is the main indicator of the overall market performance in Hong Kong. The FTSE TWSE Taiwan 50 Index is a capitalization-weighted index of stocks comprises 50 companies listed on the Taiwan Stock Exchange developed by Taiwan Stock Exchange in collaboration with FTSE. The MSCI World Index is a free-float weighted equity index that includes developed world markets and does not include emerging markets. The Mexican Stock Exchange, commonly known as Mexican Bolsa, Mexbol, or BMV, is the only stock exchange in Mexico. The U.S. Dollar Index measures the performance of the U.S. dollar against a basket of six currencies. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

1. The Wall Street Journal, September 30, 2020

2. MarketWatch.com, September 12, 2020

3. FastSet Research, September 30, 2020

4. CNBC.com, September 22, 2020

5. EyeOnHousing.com, September 16, 2020

6. Federation of American Scientists, October 2, 2019

7. MSCI.com, September 30, 2020

8. MSCI.com, September 30, 2020

9. MSCI.com, September 30, 2020

10. CNBC.com, September 30, 2020

11. The Wall Street Journal, September 4, 2020

12. The Wall Street Journal, September 16, 2020

13. The Wall Street Journal, September 15, 2020

14. CNBC.com, September 17, 2020

15. CNBC.com, September22, 2020

16. CNBC.com, September 24, 2020

17. CNBC.com, September 11, 2020

18. The Wall Street Journal, September 25, 2020

19. The Wall Street Journal, September 16, 2020