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Quarterly Market Commentary Thumbnail

Quarterly Market Commentary

Well, another quarter has come to an end. Since it is that time, how about we take another look at some market highlights over the past three months.

 

  • Although the market was down for the month of September, the S&P500 was up just about 7.5% for the quarter.
  • Large Cap Growth once again led the way for the quarter with a return of 13.2%. As a reminder, this is the tech-heavy asset class. Small Cap Value brought up the rear with a return of only 2.6%
  • Year to date (YTD), Large Cap Growth tops the main asset classes with performance of 24.3%. Once again, Small Value is the worst performing class with a return of -21.5%. I wonder how those Dimensional Fund investors are feeling?
  • All major asset classes are up since the market low in March of this year. However, most are still down since the market peak in February. Only Large Growth (13.8%), Mid Growth (6.5%) and Large Blend (0.5%) are up since the original peak.
  • When it comes to sectors, the best and worst performers aren’t really a surprise. Best sectors are Online Retailers, Home Improvement and Technology. Worst are Hotels and Cruise Lines, Airlines and Energy.
  • As a reminder, despite average intra-year drops of 13.8%, the market is still positive in 30 out of the last 40 years.
  • One piece of interesting information looks at high-frequency data. While Purchase Mortgage Application is now positive at 22%, every other category is currently negative. Other categories include Consumer Debit/Credit Transactions (-4%), Hotel Occupancy (-32%), Travel and Navigation App Use (-40%), US Seated Diners (-43%), and TSA Traffic (-70%).
  • In the near future, the US will see more Deaths than Births in our country. With immigration dropping, our population growth will go negative. As I’ve mentioned before, a big portion of GDP is made up of the growth of US workers.
  • August 2020 Unemployment rate was 8.4%, or about 50% higher than the 50-year average of 6.3%. Wage growth of 4.9% was above the 50-year average of 4%.
  • Most employment categories are not anywhere close to being recovered. Leisure and Hospitality lost the most jobs by category and only half of them have returned.
  • While the Fed has shifted to accommodate higher inflation, inflation is not close to reappearing. In July and August of this year, Headline CPI (Consumer Price Index) was 1% and 1.3% respectively. It has averaged 3.9% over the last 50 years.
  • Another reminder, over the last 20 years (ending 2019), the S&P500 has averaged 6.1% a year. REITs (Real Estate Investment Trusts) have averaged 11.6% during the same period. A 60/40 portfolio of 60% in stocks and 40% in bonds has averaged 5.6%. And, the Average Investor has done 2.5%.
  • For those with a bunch of money in savings account, things are not looking good because there are no good rates for cash. The average interest rate is 0.22% now. To keep up with inflation, you need a rate of 1.73%. To keep up with education inflation your return would have to be 1.74%. Finally, to stay up with medical care inflation the necessary cash yield would have to be 4.48%.

 

I have to say, this was the most depressing quarterly commentary I’ve had to write in quite some time. I’m a pretty positive person and the good news was hard to find.  Hopefully the next one in early 2021 will be more positive.

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