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.