Happy Monday to everyone.
Big Monday Night Football game tonight, Chiefs at the Raven’s stadium.
Update on our Affinity employee with Coronavirus; this person experienced cold like symptoms and is now feeling much better. We plan on welcoming this person back to work from home work-quarantine next Monday. ☺
Side note; each and every person was tested for COVID after learning of the one positive case within the office. All other test results came back negative. That was my first encounter taking a Coronavirus test. To walk you through my experience, my son and I did our tests together at CVS. We scheduled it online in advance, showed up at their drive-thru, they walked me through a few instructions, and 10 minutes later we were done. Basically, you put what looks like a thin q-tip up each nostril, put that into a tube and seal it up, then deposit it into a separate box to be sent of for testing. We got the test results back in less than 48 hours. Others in our office took a day or two more to get back their results, which I believe just depends on the location. I understand Walgreens offers a similar process. It is very simple and there is no cost. I wanted to share this step by step experience with you incase you find yourself in a similar situation where you feel the need to get tested as well.
President Trump has officially nominated for Associate Justice of the Supreme Court, Amy Coney Barrett.
Upcoming dates to note:
Tuesday 9/29 Round 1 of Presidential Debate
Thursday 10/7 Vice President Debate
Thursday 10/15 Round 2 of Presidential Debate
Thursday 10/22 Round 3 of Presidential Debate
Mon 9/21 -1.84%
Tues 9/22 +0.52%
Wed 9/23 -1.92%
Thurs 9/24 +0.20%
Fri 9/25 +1.34%
Last week -1.75%
Since 2/19 market high -7.41%
Bloomberg report on last week’s Market: U.S. Stocks See Third-Biggest Outflow Ever
The risk-off sentiment on Wall Street fueled the third-worst weekly outflow on record from U.S. equities, with technology shares falling out of favor.
U.S. stock funds bled $25.8 billion in the week through Sept. 23, according to Bank of America Corp. and EPFR Global data, in a reversal from the previous week’s biggest inflow in more than two years. Investors exited the hottest sector of the rebound, pulling the most money out of tech funds since June 2019.
While traders were buying the dip just a week ago, sentiment has switched firmly to risk off in recent sessions, with pessimism seeping in about the prospect of further fiscal stimulus to support the world’s biggest economy.
In a flight to haven assets, investors are pulling out of equities as well as cash to put their money into debt and gold. Bond funds received $1.3 billion in the most recent week, while the precious metal attracted $1.4 billion in inflows — the most since the flash crash in early August — according to the BofA report. Stocks overall bled $22.8 billion, the most since March.
MarketWatch: Here’s the silver lining for stocks if Democrats ‘sweep’ November election
Investors may be happy to see the back of September, which is stacking up as the worst month since March for the S&P 500.
A poll from financial advisory organization deVere Group says the number-one investor worry in the world right now isn’t who wins, but a contested U.S. election that could drag on for weeks. But our call of the day from Danske Bank’s global head of research, Thomas Harr, says who wins the White House matters less than a united victory.
The prevailing investor wisdom has gone something like this: stock markets fear a win by Democratic candidate Joe Biden because he’ll hike corporate taxes to pay for more fiscal spending. But a win by President Donald Trump — should he take both the House of Representatives and Senate — means a rally for equities, due to potential tax cuts.
“Where we differ from consensus is the impact on equities in case of a Democratic sweep, which we believe could turn out to be positive for U.S. equities due to fiscal expansion,” says Harr.
“A possible knee-jerk negative effect on equities, corporate confidence and business investment from fear of higher taxes should be short-lived as the market realizes that Biden is unlikely to push ahead with all his tax threats,” says the analyst, who expects corporate income taxes would rise to less than the 28% rate that Biden has suggested, from 21% currently.
That is because, even in a sweep, Democrats would at best win a slight majority in Congress, so it is reasonable to expect higher spending won’t completely be offset by higher taxes. Harr says it is doubtful that Trump will manage a clean sweep, even if he wins.
“Surveys suggest that Democratic voters support health care, infrastructure and climate investment at the expense of higher deficits,” he says. And that tax burden will fall mostly on higher earners, and there will be less trickle-down to lower earners.
Worsening Virus Trends Are Raising Alarms for Stock Investors by Vildana Hajric, Lu Wang, 9/25/20
As the likelihood of additional federal stimulus fades, U.S. stock investors are returning their focus to the coronavirus pandemic and not liking what they see. High-frequency data that tracks economic activity shows a slowdown in the recovery from the height of the lockdowns, with Americans again cutting back on flights and going out to eat less often. Public-transit use also remains low, while jobless claims are stubbornly elevated. Meanwhile, the prospects for a vaccine in the next few months have also waned just as the latest data shows an uptick in cases. Plenty of non-virus worries have also emerged in recent weeks, including fears about a chaotic aftermath to the presidential election as well as heightened tensions between the U.S. and China. The concern is that the worst of the coronavirus fallout is yet to come, says Tom Lee, co-founder and head of research at Fundstrat Global Advisors. Back-to-school efforts and the flu season are adding to fears of a new wave of deaths, according to Lee. Mobility data for restaurants, theme parks, shopping centers, museums and movie theaters has flattened. That tends to closely track consumer spending and could portend a spending pullback in the coming months.
Global 33,349,839 cases 1,003,043 deaths
US 7,321,465 cases 209,454 deaths (+2.61%, +5,332 increase from last week)
KS 57,809 cases 639 deaths
MO 126,528 cases 2,164 deaths
Highlights from analysts and economics
From JP Morgan
Notes on the Week Ahead
For most of the last 40 years, the United States, like most developed economies, has suffered from a lack of demand for goods and services. This has contributed to a steady slide in inflation. More importantly, it has indirectly triggered recessions by funneling money towards assets, feeding bubbles which have inevitably burst. A lack of aggregate demand has also slowed the recovery from those downturns, inflicting hardship on millions of workers and small business owners.
The causes of this lack of demand are not hard to deduce. Nor is it difficult to see how to remedy the problem, via changes in the tax code, exchange rate policy and government spending. However, these changes require tough political decisions and we seem to live in a democracy which has run to populist seed, preventing us from confronting problems in a mature way.
In the absence of such mature decisions, politicians have reached out for easy solutions. Modern Monetary Theory (or MMT for short), is a set of ideas that has come into prominence in recent years, appearing to provide just such an answer by promoting the idea that budget deficits can largely be expanded without consequences.
MMT starts with a logical truism, namely that a sovereign government, in control of a sovereign central bank, can never be forced to default on its own currency debt. This being the case, in an economy where there is a lack of aggregate demand, a government can just ramp up government spending or cut taxes to remedy the situation. As the deficit rises, the central bank can buy more of the government debt to prevent any increase in long-term interest rates. MMT argues that there isn’t any problem with this until inflation appears. If inflation does crop up, the government can just raise taxes to quell demand.
While MMT may seem like a purely theoretical construct, it should be recognized that many governments, including the U.S. government, are effectively already putting MMT into practice. After years of fiscal restraint, Congress passed the Tax Act of 2017, even when the economy was close to full employment, leading to a sharp widening of the Federal deficit in 2018. 2020 has, of course, seen a much more significant increase in the deficit in reaction to the social distancing recession with the federal debt rising from 79% of GDP this time last year to likely over 105% of GDP next year.
The danger, of course, is that this could all end very badly. For as long as inflation remains low, there seems little cost to this massive increase in the money supply or in total financial assets.
However, the problem is that each dollar of the money stock, and indeed of financial assets in general is, essentially, a coupon, entitling the bearer to some share of the goods and services produced by the U.S. economy. If I have money in a bank account or a mutual fund, I didn’t accumulate it just to look at the pretty numbers. I assume that, at a time of my choosing, I can cash in these assets for some goods and services.
If investors and consumers suddenly began to expect higher inflation, interest rates could rise sharply both because of an increase in expected inflation and uncertainty about how much that inflation could be in the future. Many of the economies of Latin America provide a contemporary and stark warning about what can happen to an economy when people lose faith in its money.
It should be emphasized that there is nothing imminent or inevitable about this outcome. Inflation is very unlikely to spiral higher 2020 or 2021 in an economy of still high unemployment. Moreover, responsible fiscal and monetary policy in the aftermath of the 2020 elections should probably still be able to alleviate the situation.
However, for investors, it is important to consider how to protect themselves if such policies are not adopted and we find ourselves, within a few years, in new paradigm, where, in sharp contrast to the last few decades, inflation trends up and many financial asset prices trend down.
Weekly Market Recap
The sudden need for social distancing in response to the pandemic has accelerated longer-term trends in commercial real estate: stores closed, warehouses rapidly processed inventory as online shopping increased, employees began working from home and many Americans struggled to pay rent after historic job losses. Yet, rent collections in many REIT sectors remained stable. Despite remote working, office rent collections remained strong, and have modestly improved since April. Office contracts are often long term, and as employees slowly come back to work, having ample office space is necessary to maintain social distancing. Collections on apartments also remained surprisingly strong, but could see pressure ahead with the expiration of eviction freezes and extra unemployment benefits. Retail was the hardest hit property sector, with collections falling to 73% for free standing stores, and just 50% for shopping centers in April. However, both of these areas rebounded, with collection rates of 91% and 80%, respectively, in August. Industrial real estate fared the best, with collections barely budging, as warehouses processed shipments from increased online orders. Going forward, we anticipate many of these trends, like the shift from brick-and-mortar retail to e-commerce and the rise of telecommuting, will continue. This underscores our sector preferences in REITs for industrial property, including warehousing, and data centers over more pandemic-vulnerable areas like retail, office and lodging.
Weekly Strategy Report
The economic recovery is gaining pace as macro data improves and business and consumer confidence strengthens. An unprecedented level of monetary and fiscal stimulus will continue to fuel a powerful pickup in growth.
Nevertheless, we see looming event risks in the fourth quarter. Among them: uncertainty about the U.S. election outcome, the shape of any Brexit deal and rising COVID-19 case counts in Europe. Still, there are also potential upside risks, particularly relating to fiscal policy and a vaccine.
While our constructive central case leads us to maintain a risk-on tilt in our multi-asset portfolios, we anticipate some volatility over the autumn and look to remain well diversified and nimble. We spread our risk between stocks and credit, while within equities we favor a broad regional diversification. We also move to underweight USD, which has scope to weaken as the global recovery gains momentum. Although we are mildly underweight duration, central bank backstops in credit markets sometimes allow us to use high quality corporate credit as a proxy for duration.
Analyst Simeon Hyman On recent economic data:
The data is not all bad, but it’s not all good either. Equity markets across the globe continued to rise in August. On the good side of the ledger: another strong ISM manufacturing survey, a hot housing market and a better than expected second quarter corporate earnings season. On the bad side of the ledger: consumer confidence hit a six-year low, the retail recovery slowed and Washington persisted in its stalemate over stimulus.
One of the most important pieces of non-coronavirus news during the month was a change in Fed policy that Chairman Jerome Powell called a “robust updating.” The Fed is now more likely to tilt its policy toward keeping unemployment low and tolerating a bit more inflation.
ProShares Analyst Kieran Kirwan: (Kieran has spoken to the Affinity clients multiple times)
Many companies are raising guidance again. And the Fed announced a dovish policy shift that essentially codified a strategy of allowing higher levels of inflation than previously targeted, which on balance should further support risk assets like equities.
Another piece of evidence that the markets are potentially assuming a more “normal” pattern is that volatility levels have declined. In fact, realized volatility for the month of August fell to its lowest level since January 2020. And as of 8/31/2020, it is at a level below its long-term average. Near-term headwinds like the ongoing pandemic and an upcoming election aside, the perpetual wall of worry perhaps seems like it could be a little less imposing these days.
The gap between the winners and losers, known technically as dispersion, remains large. The performance gap between tech stocks and energy stocks from YTD stands at a staggering 75%. Even within thematic strategies, which have captured a large mindshare of investor interest this year, there is a rather large performance divide.
***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 7th @ 8:00am.
- 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 with special Attorney Marion Stern both from 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 6th at 6:00pm & Wednesday October 7th at 11:00am
- Click Here to Register for October 6th or 7th Or email Stacy at [email protected]
- Pros and cons of a Will based estate plan
- Pros and cons of a Trust based estate plan
- Co-hosted by Glenn Stockton with Stockton & Stern Law firm
Social Security and Tax Strategy Webinar on Tuesday October 13th 6:00pm and Wednesday October 14th at 12:00pm
Click here for October 13th or 14th Or 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.
Referral rewards program:
Don’t forget that the news creates drama. The stock market moves for 2 reasons which are greed and fear.
Any service work you would like us to do for you, please email your request to us.
Please feel free to share this email with anyone you know, as the best way to battle stock market anxiety is education.
Thank you for your time in reading these updates.
Stay safe and stay healthy,