Hello and happy Monday to everyone,
Have you heard of the term ‘priced in’? This is by no way an exact science but the term ‘priced in’ refers to the market is already adjusting for something that is expected to happen, but hasn’t yet happened. I bring this up because I continue to receive information from analysts and economists that talk about the things ahead of us that are both good and bad that could potentially happen, but haven’t happened yet. However, the theme seems to be the good things are already priced into the market, but the bad things aren’t priced in yet. Hence the market is up currently
Example, a vaccine. When we get a vaccine I think we can all expect the market to go up, but is it really going to go up as much as 10%-15% higher than we are now? Another is the next stimulus bill, we expect that to come too and that is positive but same thing, once that is official, do we expect the market to shoot up once we have that stimulus? Economists believe since these 2 variables are bound to happen, it is simply just a matter of when not if, that is why these positives are already priced into the market. We can expect some growth in the market from those things, but probably nothing huge.
However, the negatives are not priced in according to economists. Examples, Biden wins (I’m not trying to offend anyone, just state some facts), there will be a change in President and the market doesn’t like change as change breeds uncertainty. What if Trump gets reelected and the Dems take over the Senate then restart the impeachment process in 2021 against President Trump? What if we have complications with the vaccine or the Stimulus bill is smaller than expected? What happens when the next stimulus runs out of funding then announce there will not be any further stimulus, then Americans will have to grind thru this recession. These are all additional examples of floating negatives out there right now.
There are several positives on the radar, but also negatives as well.
Looking below in green reflects last week’s market performance each day, the swings are getting bigger. 2 Friday’s ago, it was announced that President Trump was positive for Covid-19. That Friday, the market dropped. The next Monday he is flying home leaving the hospital and the market is back up. The next day there was news that President Trump was going to hold off on the next stimulus unless he gets elected. The market dropped. The next day, there was added clarification that stated he wants the stimulus to be adjusted as he doesn’t want to give money to groups or areas of the US he feels doesn’t deserve it. He does want to sign for a stimulus for other areas of the US or groups of people that do need it. The market went back up from that too. There are a lot of emotional trades going right now and politics are playing a big roll in the market these days. But besides politics, we do have several serious issues ahead of us, and that is what we refer to ‘spots on the radar’.
Upcoming dates to note:
Thursday 10/15 Round 2 of Presidential Debate (This debate was canceled)
Thursday 10/22 Round 3 of Presidential Debate
Performance DJIA:
Mon 10/5 +1.68%
Tues 10/6 -1.34%%
Wed 10/7 +1.91%
Thurs 10/8 +0.43%
Fri 10/9 +0.57%
Last week +3.27%
Since 2/19 market high -2.59%
Tid Bits:
Be prepared: A return to normal is still a long way away, warns banking billionaire JP Morgan CEO Jamie Dimon
For those of you expecting the world to return to some sense of normalcy by the time 2021 rolls around, JPMorgan Chase JPM CEO Jamie Dimon has a message:
‘We’re going to have to live with this.’
The billionaire banking boss, in comments cited by Bloomberg News this weekend, told a conference on Friday that he doesn’t expect normality to return until the summer of 2021.
Dimon said that it’ll take that long before there’s any chance that his bank’s offices will be full staffed due to local rules, a lack of a vaccine and the personal preferences of his workforce. JPMorgan Chase is still looking to reach between 15% and 25% of capacity at this point, he said.
“We’re starting to see some people get back on the road,” Dimon explained, adding that he sees the need for the bank to start getting back to what worked like at the beginning of the year. “I think it can be done quite safely. Some are afraid. We’ll see.”
Dimon, as Bloomberg pointed out, has been pushing for the reopening of cities to boost the economy and has, himself, been going in to the office since June. He has said that he expects long-term economic and social damage should the shutdown linger for a longer period of time.
“Work-from-home has to work for clients and customers not just for employees,” said Dimon, who explained that as many as 40% of his staff could work from home even after the pandemic.
As it stands now, the U.S. on Friday reported its highest number of new daily cases since August, and former CDC director Tom Frieden told CNN on Saturday that another 20,000 COVID-19 deaths by the end of the month are “inevitable.”
John Hancock Market Recap
Fed chair’s plea
U.S. Federal Reserve Chairman Jerome Powell issued a warning to Congress and the White House, saying the risks of not doing enough to provide further coronavirus-related economic relief are greater than the risks of doing too much. Powell said that the economic recovery is still at an early stage and the current expansion is “far from complete.”
Into the unknown
As third-quarter earnings reports start to come in, an unusually large number of companies remain reluctant to offer financial guidance for their full-year 2020 and 2021 results, owing largely to uncertainty from the pandemic. As of Friday, 147 companies in the S&P 500 that have traditionally issued annual earnings guidance had done so, compared with 138 that hadn’t, according to FactSet.
COVID-19 surge
Globally, the pace of COVID-19 cases continued to rise, weighing on prospects for economic growth and financial markets. Spain’s government declared a state of emergency in Madrid, the United Kingdom reported a spike in cases, and India was set to cross 7 million cases after a surge in rural areas.
Facts:
Coronavirus
Global 37,823,453 cases 1,082,376 deaths
US 7,992,932 cases 219,706 deaths (+2.37%, +5,080 increase from last week)
KS 67,061 cases 777 deaths
MO 149,625 cases 2,512 deaths
Highlights from analysts and economics
From JP Morgan
Weekly Market Recap
September PMI numbers show that while the global economy is continuing to recover, economic activity in most countries remains well below pre-COVID-19 levels. The global composite PMI index came in at 52.1 for last month, slightly down from 52.4 in August. While the reports suggests that global economic growth has decelerated, the economy continues to recover from its April bottom. Despite this pickup in activity and forecasts of a corresponding strong bounce-back in 3Q GDP growth, GDP levels in major regions such as the U.S. and Europe have likely not achieved a full recovery. China is one of the few examples of a V-shaped recovery, reflecting the fact that, while the virus originated in China, China was also the first major country to take dramatic moves to combat the virus through the early implementation of strict lockdown rules. As a result, Chinese equities have been one of the best performing markets this year. Going forward, we expect the rest of the world to grow slowly, as most countries continue to struggle with the virus. In contrast, China should continue a more robust recovery, presenting itself as an attractive opportunity for investors given the less favorable outlook elsewhere.
Monthly Strategy Report
A new business cycle has begun, a cause for optimism both for the economy and for asset returns. But the traditional “early cycle playbook” may not apply this time around given the exceptional nature of monetary easing and the sheer scale of fiscal support in response to the coronavirus recession.
In the past, cyclical stocks have been highly correlated with value stocks. But from the market’s March lows, cyclicals have recovered sharply vs. defensives, while value has struggled against growth.
A sustained rotation into value stocks would require higher U.S. government bond yields, reflecting greater confidence in economic growth, and brightening the outlook for banks – a key value sector. In the first instance, however, faltering performance by the technology sector could also begin to narrow the gap between growth and value.
We continue to take a diversified, pro-risk position in our portfolios. We overweight equities and credit, mildly underweight duration and our portfolios will benefit from a weaker dollar. If tail risks play out in the fourth quarter and lead to market choppiness, we would be inclined to add risk in periods of weakness.
From Blackrock
COVID infections have picked up in Europe and parts of the U.S., but fatalities are far off peaks reached in the spring. Democratic presidential nominee Joe Biden has widened his lead in polls ahead of the Nov. 3 election, but the race for the Senate looks closer. Talks over a U.S. fiscal stimulus package continued in fits and starts, but the path to a pre-election deal is narrow. This raises the risk of permanent economic scarring and a weakening of an activity restart that has been running ahead of expectations. The U.S. election could change this, as differences in fiscal impulses between the outcomes are large.
Week ahead
Oct. 12-19 – China total social financing, new yuan loans and money supply
Oct. 13 – Germany industrial orders and output; U.S. international trade
Oct. 15 – Philly Fed business index
Oct. 16 – University of Michigan consumer sentiment index
Market attention will turn to key data releases gauging the status of the economic recovery across the world. In the U.S. and Europe, we’ll get more color on economic sentiment, especially in areas where virus infection rates continue to pick up. The annual IMF meetings will also be in focus, with growth forecasts likely to be revised up from earlier more bearish projections.
Opportunities:
My wife Amy’s opening. You can look her up at www.serendipityfarmandvine.com or on Facebook at Serendipity Farm and Vine.
***Open enrollment for Medicare is coming up. Here is a referral for you…
As an independent insurance agent that contracts with major carriers, I can help you decide which plan is right for YOU! Whether you are in the market for Medicare Supplements, Prescription Drug Plans, Advantage Plans, or just want to know your options, I can guide you through the process.
Community Café is Wednesday, October 14 at 8:00am for 30 minutes. Topic will be on: “Planning for Loved Ones with Special Needs”
Will live stream on Facebook Live anyone who is friends with me on Facebook or Click Here to Follow The Community Café Facebook Page
Invitations will go out via email with a link to join on zoom.us, plus those who are friends with me on Facebook
Speaker this week, Attorney Glenn Stockton & Attorney Sophia Kandt both of Stockton & Stern Law
Invitations will go out via email with a link to join on zoom.us, plus those who are friends with me on Facebook
Estate Planning Webinar Tuesday October 20 at 6:00pm & Wednesday October 21 at 12:00pm
To Register for either date please email Stacy at [email protected]
a. Pros and cons of a Will based estate plan
b. Pros and cons of a Trust based estate plan
c. Co-hosted by Glenn Stockton with Stockton & Stern Law firm
Social Security and Tax Strategy Webinar on Tuesday October 13 at 6:00pm and Wednesday October 14 at 12:00pm
To Register for either date please email Stacy at [email protected]
If you would like a copy of my 30 minute recording of Community Café on the topic of “Tax saving Strategies”, please contact Stacy and we can email it to you. [email protected]
Referral rewards program:
Reminders:
Don’t forget that the news creates drama. The stock market moves for 2 reasons which are greed and fear.
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Thank you for your time in reading these updates.
Stay safe and stay healthy,
Mark Roberts
