The Markets
Yes. No. Maybe?
Markets were sharply focused on the status of stimulus last week. First, it was ‘on.’ Then, it was ‘off.’ Then, it might be ‘on.’ Then, it was ‘off’ again. There was a big bill. There was a smaller bill. There were stand-alone options.
‘Maybe’ was enough for investors
Major U.S. stock indices finished the week higher, per Barron’s, and global indices were bullish on Friday because of U.S. stimulus talks, reported Financial Times.
“Markets are dizzy from all the talk on both sides about what they want from a deal but believe that something will inevitably happen anyway…Markets are essentially drunk on massive government spending just as they are inebriated from all the Fed quantitative easing and zero-interest-rate policy,” said an advisory group chief investment officer cited by Financial Times.
Earnings season is upon us
Another factor that influences investors is earnings season, which begins this week. During this time, companies communicate how profitable they were during the previous quarter.
Third-quarter earnings estimates for companies in the Standard & Poor’s 500 Index remain subdued. John Butters of FactSet reported, “For Q3 2020, the estimated earnings decline for the S& P 500 is -20.5 percent.”
While that is a significant decline, it is an improvement on -25.3 percent, which was the June 2020 estimate for third-quarter earnings. It is also an improvement on second-quarter’s -31.9 percent.
Some companies have not provided guidance
It is notable that one in four companies in the S&P 500 did not provide earnings per share (EPS) guidance for 2020 or 2021. (Earnings guidance is a forward-looking statement that tells investors how the company expects to perform in the near future.) “Almost all of these companies cited uncertainty regarding future economic impacts of COVID-19 as the reason for not providing or withdrawing EPS guidance for the full year,” reported FactSet.
The outlook for earnings may improve when a treatment or vaccine for the virus becomes available. The Milken Institute reported there are 318 treatments for COVID-19 and 213 vaccines in the works. Thirty-five of the vaccines are in clinical trials.
Data as of 10/9/20 | 1-Week | Y-T-D | 1-Year | 3-Year | 5-Year | 10-Year |
Standard & Poor's 500 (Domestic Stocks) | 3.8% | 7.6% | 19.1% | 11.0% | 11.5% | 11.6% |
Dow Jones Global ex-U.S. | 3.3 | -3.4 | 6.6 | -0.1 | 3.2 | 1.8 |
10-year Treasury Note (Yield Only) | 0.8 | NA | 1.6 | 2.4 | 2.1 | 2.4 |
Gold (per ounce) | 1.1 | 26.3 | 27.6 | 14.6 | 10.8 | 3.6 |
Bloomberg Commodity Index | 4.9 | -9.4 | -6.0 | -4.5 | -4.3 | -6.6 |
S&P 500, Dow Jones Global ex-US, Gold, Bloomberg Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods. Sources: Yahoo! Finance, MarketWatch, djindexes.com, London Bullion Market Association. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.
WHERE IS EVERYONE GOING? You may have read Americans are moving out of cities to escape the coronavirus or violent protests. During the past few months, pundits have said things like, “…the coronavirus pandemic has shifted attitudes about city living, altering the dynamics of the real estate market for years ahead.”
Marie Patino of Bloomberg CityLab decided to look at the data and see if it was true. She gathered information from moving companies, real estate aggregators, and real estate consultants.
As it turns out, people are leaving cities – two cities in particular.
Patino wrote, “According to [moving company] data, between May and August 2020, move requests out of New York City to any destination were up 45 percent, and in San Francisco, up 23 percent, compared to the same time last year.”
Where were people moving?
Some were moving to other cities, continuing trends that had been identified before the pandemic arrived. For instance, San Franciscans began to migrate to Seattle before 2020. Other top destinations for San Franciscans this year have included:
- Austin, TX
- Chicago, IL
- New York, NY
- Boston, MA
Likewise, New Yorkers had been moving to Los Angeles and the west coast prior to 2020. This year, they have also favored:
- Atlanta, GA
- Tampa-St. Petersburg-Clearwater, FL
- West Palm Beach-Boca Raton, FL
- Orlando, FL
One real estate aggregator’s 2020 Urban-Suburban Market Report found, “Both urban homes and suburban homes are selling more quickly now than they were in February, and the percent change in time on market has been nearly equal for both classifications. The share of homes selling above their list price in suburban areas vs. urban areas exhibit the same trend nationally.”
Weekly Focus – Think About It
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Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Treiberg Wealth Management, a registered investment advisor and separate entity from LPL Financial. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The DJ Global ex US is an unmanaged group of non-U.S. securities designed to reflect the performance of the global equity securities that have readily available prices. The 10-year Treasury Note represents debt owed by the United States Treasury to the public. Since the U.S. Government is seen as a risk-free borrower, investors use the 10-year Treasury Note as a benchmark for the long-term bond market. Gold represents the London afternoon gold price fix as reported by the London Bullion Market Association. The DJ Commodity Index is designed to be a highly liquid and diversified benchmark for the commodity futures market. The Index is composed of futures contracts on 19 physical commodities and was launched on July 14, 1998. The DJ Equity All REIT TR Index measures the total return performance of the equity subcategory of the Real Estate Investment Trust (REIT) industry as calculated by Dow Jones. Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. This newsletter was prepared by PEAK. Past performance does not guarantee future results. You cannot invest directly in an index. Consult your financial professional before making any investment decision.