Performance for Week Ending 9/18/2020:
The Dow Jones Industrial Average (Dow) finished off 0.03%, the Wilshire 5000 Total Market IndexSM (Wilshire 5000SM) fell 0.05%, the Standard & Poor’s 500 Index (S&P 500) lost 0.64% and the Nasdaq Composite Index (NASDAQ) dipped 0.56%. Sector breadth was negative with 7 of the 11 S&P sector groups closing lower. The weakness was led by the Consumer Discretionary (-2.33%) sector followed closely by Communication Services (-2.31%). On the upside, Energy (+2.90%) was the best performer.
||Closing Price 9/18/2020
||Percentage Change for Week Ending 9/18/2020
||Year-to-Date Percentage Change Through 9/18/2020
*See below for Index Definitions
MARKET OBSERVATIONS: 9/14/20 – 9/18/20
The major market indices finished lower for a third consecutive week, leaving the S&P 500 at its lowest level since early-August. Weighing on the markets was the fading possibility that lawmakers will roll out additional fiscal stimulus in the near term, a fuzzy outlook from the Federal Reserve, an uptick in Covid cases in Europe, and another round of weakness in the mega cap Technology space. On a positive note, the Organization for Economic Cooperation and Development (OECD) said the global economic slump won't be as sharp as previously feared and now expect the US economy to contract by 3.8% in 2020 versus a mid-year forecast of a 7.3% plunge.
As widely expected, the Federal Open Market Committee (FOMC) left the target interest rate unchanged at a range of 0–0.25% and provided new forward guidance. The FOMC also formally adopted outcome-based guidance, setting out the conditions under which rates will rise: "the Committee… expects it will be appropriate to maintain this target range [0-to-0.25%] until labor market conditions have reached levels consistent with the Committee's assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time.” This leaves the Fed with considerable room for maneuver, because they noted in their recent strategy paper that “maximum” employment can’t be precisely estimated. Moreover, “moderately exceed” and “for some time” are vague, presumably deliberately.
During the follow-up press conference, Fed Chair Powell indicated a long road to “maximum employment” and said the central bank was limited in its capacity to address some of the gaps around wage growth and workforce participation. Powell also said the economic recovery may take longer than people would like, and reiterated calls for Congress to spend more money to support households and businesses. Last week, President Trump urged congressional Republicans to seek a bigger and more expensive package of coronavirus relief aid, but his comments drew a cool reception from some GOP lawmakers skeptical of a growing price tag.
While there may be some additional downside risk in the weeks ahead, we believe the market is in a consolidation phase following the very strong performance off the March lows and not a broader reversal of the market’s uptrend. We remain upbeat on the economic recovery and earnings expectations are starting to be revised to the upside. The healthcare system seems to be better prepared for any new flare up in COVID cases and paradoxically, the market knows that the worst things get, the more likely the Federal Reserve and policymakers will inject additional stimulus into the economy. While nothing moves in a straight line, we continue to believe the return profile over the next 12 – 24 months should remain asymmetrical, with an upward bias.
The Week Ahead: Fed speak will be the focal point of the coming week with well over a dozen speeches and presentations on the docket including testimony By Fed Chairman Powell to both the House Financial Services Panel and Senate Banking Committee. Reports of interest on the data calendar include; August existing home sales, Markit Manufacturing PMI, August new home sales, initial jobless claims for the week ended September 19, and August durable goods orders. Third quarter earnings season will kick off in earnest this week with seven members of the S&P 500 scheduled to release results.
The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally defined as the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928.
Wilshire 5000 Total Market IndexSM represents the broadest index for the U.S. equity market, measuring the performance of all U.S. equity securities with readily available price data. The index is comprised of virtually every stock that: the firm's headquarters are based in the U.S.; the stock is actively traded on a U.S. exchange; the stock has widely available pricing information (this disqualifies bulletin board, or over-the-counter stocks). The index is market cap weighted, meaning that the firms with the highest market value account for a larger portion of the index.
Standard and Poor's 500© Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The NASDAQ Composite Index is a broad-based capitalization-weighted index of stocks in all three NASDAQ tiers: Global Select, Global Market and Capital Market. The index was developed with a base level of 100 as of February 5, 1971.
This material contains opinions of the author, but not necessarily those of Guggenheim Partners, LLC or its subsidiaries. The opinions contained herein are subject to change without notice. Forward looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission of Guggenheim Partners, LLC.
Guggenheim Investments represents the investment management businesses of Guggenheim Partners, LLC ("Guggenheim"). Guggenheim Funds Distributors, LLC is an affiliate of Guggenheim.
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*Assets under management is as of 03.31.2022 and includes leverage of $20.0bn. Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Fund Management (Europe) Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
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