COVID-19 Archives - Denali Wealth Management

2021-Q3 Market Commentary

General Market Commentary as of September 30, 2021

The third quarter showed mixed results with the S&P 500 hitting a new all-time high in July and later in September suffering its first 5% pullback in nearly a year. The S&P 500 ended the quarter up 0.23%, the Dow Jones Industrial Average was off -1.91%, and the Nasdaq Composite finished down -0.38%. On the fixed income side most bond classes saw little change from where the quarter started. Internationally, foreign markets declined in the third quarter. Emerging markets dropped on concerns of a global recovery, in addition to growth worries in China stemming from the Evergrande debt issues.

Sectors showed mixed results for the quarter with financials leading the way and industrials and materials lagging. Large-cap stocks outperformed small-cap stocks as economic data was mixed and the outlook for future economic growth became less certain. Growth outperformed value aided by gains in the technology sector. Commodities posted another strong quarter led by the rally in oil prices. Supply chain constraints and margin compression coming from multiple industries has tempered the outlook on corporate earnings.

The Federal Reserve indicated it will begin to taper Quantitative Easing in Q4. However, when exactly they will start to scale back asset purchases or the pace at which they will remains unknown. In Washington, besides the Fed, another focus is on whether the debt ceiling will be extended and if there will be any significant tax increases to follow. Policymakers continue to revise regulations regarding COVID-19 at both the federal and state level. The number of COVID-19 cases continues to be a challenge for businesses seeking employees as they attempt to properly meet fluctuating consumer demands.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	0.23%	28.09%	13.92%	14.72%	4,307.54
Dow Jones Industrial Average	-1.91%	21.82%	8.55%	13.08%	33,843.92
NASDAQ Composite	-0.38%	29.38%	21.55%	22.16%	14,448.58

Source: Morningstar. The S&P 500, Dow Jones Industrial Average, and NASDAQ Composite are unmanaged indexes. It is not possible to invest in an index. Past performance is no guarantee of future results. * Price only. Does not include dividends.

All overviews and commentary are intended to be general in nature and for current interest, educational purposes and factual reference only and are subject to change based on market and other conditions.

2021-Q2 Market Commentary

General Market Commentary as of June 30, 2021

The second quarter of the year continued to reward investors as the market climbed into new record territory. The S&P 500 finished the quarter up 8.17%, the Dow Jones Industrial Average was up 4.61%, and the Nasdaq Composite finished up 9.49%. Real Estate was the strongest S&P 500 sector for the quarter, followed by Information Technology, Energy, and Communication. Bond yields dropped in Q2 following their rise in the prior quarter as the yield on 10-year U.S. Treasuries dropped from 1.74% at the end of the Q1 to 1.45% at the end of the Q2.

Inflation remains a key focus for many investors as U.S. consumer prices were up by 5.4% year to date ending June 2021, the largest annual increase since 2008. Excluding energy and food, the CPI rose 3.8% over the 12-month period, the largest one-year increase since 1992. Oil prices continued to increase in Q2, up 24.19%, and are now up 51.42% since the start of the year. Gasoline prices continue to rise as well, up 36.43% since the start of the year. U.S. median existing-home sales price reached new record territory in Q2 as people continue to seek more space and bigger homes.

The easing of restrictions on businesses and the Covid-19 vaccine rollout has not helped the labor market as much as anticipated. States are weighing options for unemployment benefits while job openings hit a record high as businesses struggle to fill open positions. The Fed implied monetary policy is not likely to be tightened any time soon, while the battle over additional spending drags on in Washington as the deficit continues to grow. Earnings growth this year is expected to be very positive and there seems to more clarity compared to where we were this time last year.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	8.17%	38.62%	16.49%	15.41%	4,297.50
Dow Jones Industrial Average	4.61%	33.66%	12.44%	13.99%	34,502.51
NASDAQ Composite	9.49%	44.19%	24.53%	24.53%	14,503.95

2021-Q1 Market Commentary

General Market Commentary as of March 31, 2021

The start to 2021 picked up where it left off in 2020 as the stock market continued to surge and reach new milestones. The S&P 500 finished the quarter up 5.77%, the Dow Jones Industrial Average was up 7.76%, and the Nasdaq Composite finished up 2.78%. Value stocks continued to gain ground versus the previously dominant growth stocks. Both U.S. Small Cap and U.S. Mid Cap outperformed U.S. Large Cap. March was the fourth straight month the yield on the 10-year U.S. Treasury increased and on March 31, 2021 stood at 1.74%.

According to the Institute for Supply Management (ISM), manufacturing activity in March posted its largest increase since 1983. Housing prices continue to appreciate as the real estate market is being fueled by low inventory, strong demand, and low mortgage rates. Oil prices continued to rally in the quarter as economic activity and global travel picked up. Energy and financials were the strongest performing S&P 500 sectors to begin the new year, while consumer staples and information technology were detractors.

The effectiveness of the vaccine rollouts will help determine the extent of the economic momentum moving forward. Monetary support and the reopening of the economy have helped propel U.S. growth. In March, U.S. employers added 916,000 new jobs and the unemployment rate dipped from 6.2% to 6.0%. The American Rescue Plan added $1.9 trillion bringing the fiscal support total in excess of $5 trillion. The inflationary impact of these policies is leading to skepticism of whether the Fed can maintain its accommodative plans. Fed Chair Powell has committed to maintain the Fed’s policy of near zero interest rates until the economy exceeds his employment and inflationary targets.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	5.77%	53.71%	14.58%	14.04%	3,972.89
Dow Jones Industrial Average	7.76%	50.48%	11.02%	13.27%	32,981.55
NASDAQ Composite	2.78%	72.04%	23.31%	22.16%	13,246.87

2020-Q4 Market Commentary

General Market Commentary as of December 31, 2020

U.S. markets ended the year strong in Q4. The S&P 500 finished the quarter up 11.69%, the Dow Jones Industrial Average was up 10.17%, and the Nasdaq Composite finished up 15.41%. For the year, they finished in record territory with the S&P 500 up 16.26%, the Dow Jones Industrial Average up 7.25%, and the Nasdaq Composite up 43.64%. In the quarter, the U.S. equity market underperformed non-U.S. developed markets and emerging markets. Value outperformed growth across large and small cap stocks. Small caps outperformed large caps and Small value ranked at the top with a 33.36% return for the quarter.

Interest rate changes were mixed in the U.S. Treasury fixed income market during the fourth quarter of 2020. The yield on the 5-Year U.S. Treasury note increased 8 basis points (bps), ending at 0.39%. The yield on the 10-Year Treasury increased 29 bps to 0.93%. The 30-Year U.S. Treasury bond yield increased 18 bps to finish at 1.64%. On the short end of the yield curve, the 1-Month US Treasury bill yield remained unchanged at 0.08%, while the 1-Year U.S. T-bill yield decreased 1 bps to 0.13%. The 2-Year U.S. Treasury note yield finished unchanged at 0.09%.

The year 2020 proved to be one of the most tumultuous in modern history, marked by a number of developments that were historically unprecedented. But the year also demonstrated the resilience of people, institutions, and financial markets. Governments and central banks worked to cushion the blow, providing financial support for individuals and businesses by adjusting lending rates. For investors, the year was characterized by sharp swings for stocks. Ultimately, despite a sequence of epic events and continued concerns over the pandemic, global stock market returns in 2020 were above their historical norm.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	11.69%	16.26%	12.00%	12.94%	3,756.07
Dow Jones Industrial Average	10.17%	7.25%	7.38%	11.93%	30,606.48
NASDAQ Composite	15.41%	43.64%	23.13%	20.81%	12,888.28

2020-Q3 Market Commentary

General Market Commentary as of September 30, 2020

Following the record setting performance in Q2, U.S. markets continued upward as a whole notching solid returns again in the third quarter. The S&P 500 finished the quarter up 8.47%, the Dow Jones Industrial Average was up 7.63%, and the Nasdaq Composite finished up 11.02%. Changes in interest rates were mixed in the U.S. Treasury fixed income market. Yield on the 5-year note decreased ending at 0.31% while both the 10-year and 30-year note increased, ending at 0.64% and 1.46%, respectively. Government bond interest rates across the globe were also mixed.

The latest stimulus package has stalled and it seems more likely that a deal will not take place until after the election. Employment numbers continue to trend in a positive direction as companies and industries are forced to adapt. Weaker sectors of the economy, such as services and energy, are slow in their recovery. Stronger parts of the economy, such as durables and technology, are providing heavy lifting, some surpassing pandemic-driven economic losses, leading to GDP forecasts that are closing in on pre-pandemic levels.

Many are feeling the cyclical angst that comes around every four years heading into our presidential election. Add in COVID-19 to the mix this time around and we have a recipe ripe for widespread market speculation. If this year has taught us anything, as suggested in previous commentary, with all the uncertainty, one thing we can count on is our healthcare system to respond to whatever challenges it faces. It will likely be a bumpy and volatile ride the next month or so, but past the daily headlines there is promise as the markets remain resilient as we look forward to the year ahead.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	8.47%	12.98%	10.11%	11.86%	3,363.00
Dow Jones Industrial Average	7.63%	3.21%	7.43%	11.27%	27,781.70
NASDAQ Composite	11.02%	39.61%	19.79%	19.31%	11,167.51

2020-Q2 Market Commentary

General Market Commentary as of June 30, 2020

After consumer spending fell a record 13.6% in April due to the lockdowns, the reopening of states and businesses around the country helped stocks rebound from their March lows. The month of April saw indices logging their best monthly gains since 1987. Combine that with a strong May and it was the best two-month performance since 2009. The month of June logged modest gains even as a resurgence of coronavirus cases and the civil unrest slowed the rally. The S&P 500 finished the second quarter up 19.95%, the Dow Jones Industrial Average finished the second quarter up 17.77%, and the Nasdaq Composite finished the second quarter up 30.63% and moving into positive territory for the year.

The Fed has shown that it is willing to do whatever is needed to provide support to the economy and the markets. Congress has continued to introduce legislation aimed at supporting Americans through the recovery. Governors across the country have ruled differently from state to state on plans for reopening, complicating economic forecasting. Add in the potential for areas closing again due to reported spikes in data and it becomes clear the economic rebound will be limited until consumers regain the confidence that they are safe to resume regular activities.

Hundreds of companies have withdrawn their forecast for 2020 making it difficult for investors to value stocks. A second wave of coronavirus cases continues to be the leading risk facing fund managers. There is still plenty of uncertainty over the shape and speed of the recovery yet it would be unlikely to see the record volatility we saw in the first half of the year repeat itself in the second half of the year. At the same time, political jousting seems eminent to only ramp up as the fall election nears. If the first two quarters were any indication, we can expect the unexpected.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	19.95%	5.39%	8.56%	8.49%	3,100.29
Dow Jones Industrial Average	17.77%	-2.96%	6.53%	7.94%	25,812.88
NASDAQ Composite	30.63%	25.64%	17.88%	15.07%	10,058.77

2020-Q1 Market Commentary

General Market Commentary as of March 31, 2020

Q1 of 2020 saw the 11-year bull market run come to an abrupt end. The World Health Organization (WHO) declared COVID-19 a pandemic and by then fear had already spread throughout the market as sectors suffered across the board. The S&P 500 posted a 20% loss for the quarter, the biggest quarterly decline since 2008. The Dow lost 23% for the quarter, the biggest drop since 1987. The Nasdaq suffered a 14% drop. Energy companies took some of the biggest blows. Severe reduction in air travel and motorists staying off the road has decimated fuel demand, coupled with price wars overseas and oil prices ended the quarter with their biggest losses on record, losing two-thirds of their value. Volatility reached an all-time high and reminiscent of figures during the financial crisis.

The Federal Reserve stepped in multiple times to help stabilize the market by rolling out new programs at all hours of the day to stop the bleeding of this health crisis. First, the Fed established a liquidity backstop to support the flow of credit to households and businesses. The next day, they broadened their program of support for flow of credit by establishing a Money Market Mutual Fund Liquidity Facility. One day later, they announced the establishment of temporary U.S. dollar liquidity arrangements with other central banks across the world. These actions helped thwart the uneasiness over the supply of U.S. dollars or a potential run on cash. The announcement of two emergency rate cuts last month was something that hasn’t been done since the financial crisis.

To end the quarter, a record 3.3 million Americans filed for unemployment benefits, nearly five times the previous record. Unemployment will undoubtedly grow as numbers update and increased mitigation efforts have caused entire businesses to shut down. The coronavirus stimulus bill was the largest economic-relief package in U.S. history. More funding and relief payments are expected to follow as the government has not been shy in attempting to weather the storm. We can also expect that our healthcare system will ramp up and respond to this problem better than anywhere else. While the data can be confusing and sometimes troubling to digest at times, there have been encouraging signs from the medical community that provide hope to those who need it most. We find ourselves in a time when self-quarantine, social distancing, and flattening the curve is the new normal. The virus has put strains on everyone to one degree or another, but eventually this too shall pass.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	-20.00%	-8.81%	3.04%	4.56%	2,584.59
Dow Jones Industrial Average	-23.20%	-15.47%	1.98%	4.28%	21,917.16
NASDAQ Composite	-14.18%	-0.38%	9.21%	9.46%	7,700.10