market commentary Archives - Page 3 of 3 - Denali Wealth Management

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

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.

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

2019-Q4 Market Commentary

General Market Commentary as of December 31, 2019

The fourth quarter capped off a strong 2019, with the S&P 500 up 9.1% in the quarter, finishing the year with a 31.5% gain. This run led to the US market entering into the longest bull market on record. Advances in trade negotiations, and improved global economic data boosted international equities. Developed international and emerging markets both fared well rising 8.2% and 11.8%, respectively.

In October, the Fed cut rates for the third time this year. The Committee indicated it was comfortable with a pause in the rate cuts barring a material deterioration in the economy. The yield curve is no longer inverted and the 10-year US Treasury Yield ended the year at 1.92%.

The US economy grew 2.1% in the 3rd quarter, led by healthy consumer spending. Employment numbers finished the year strong, and the unemployment rate dipped back down to a historic low of 3.5%. Manufacturing contracted last month to recent lows as businesses are cautious to invest. Overall, even with strong numbers to end the decade, the continued theme of uncertainty will likely carry into the new year.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	8.53%	28.88%	13.00%	9.43%	3,230.78
Dow Jones Industrial Average	6.02%	22.34%	13.03%	9.87%	28,538.44
NASDAQ Composite	12.17%	35.23%	18.57%	13.63%	8,972.60

2019-Q3 Market Commentary

General Market Commentary as of September 30, 2019

The third quarter saw, for the first time in over a decade, the Federal Reserve cutting interest rates (not once but twice). Data suggests that later this month we are likely to see a third rate cut in as many meetings. With concerns over global economic weakening, trade tensions, and low inflation around the world, bond yields have continued to fall. Meanwhile, abroad, the European Central Bank (ECB) unveiled a stimulus package in hopes of reviving growth and inflation in the face of negative interest rates.

Despite the ongoing global trade fears and political rhetoric, the US equity market made modest strides in Q3. Some of the stronger returns were seen in the defensive equity and fixed income sectors, benefiting from lower interest rates. As we near the end of the year, year-to-date returns for all major asset categories remain in positive territory.

The current inverted yield curve could be interpreted as an ominous signal, yet the record low unemployment rate and the rise in payroll suggest otherwise. Regardless, predicting “if” a recession will occur, let alone “when”, would be a feat in and of itself. With all the noise circulating around this uncertainty it will likely only ramp-up over the next year. However, the market has shown to reward those who stay disciplined throughout the process.

Market Recap

Tot Return	3-MO*	12-MO*	3-Year*	5-Year*	Closing Value
S&P 500	1.19%	2.15%	11.14%	8.58%	2,976.74
Dow Jones Industrial Average	1.19%	1.73%	13.71%	9.57%	26,916.83
NASDAQ Composite	-0.09%	-0.58%	14.62%	12.23%	7,999.34