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September Market Insights

September Market Insights

October 06, 2020
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Index Performance

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View expanded table.

View expanded table.

US and International Equities

The S&P 500 Index gave back some gains in September after a strong five-month run, with most sectors finishing in the red. The utilities and materials sectors were the exceptions, both gaining for the month. The sectors with the largest pullbacks this past month were energy, communication services, information technology, and consumer discretionary. Given the challenges with the technology sector, large growth underperformed large value. In addition, mid and small cap equities also lost ground this month.

International equities were also broadly lower, with both the MSCI EAFE and MSCI EM indexes both down this past month.

Fixed Income, Currencies, and Commodities

The bellwether Bloomberg Barclays US Aggregate Index finished the month very slightly lower and most major bond sectors fell. US Treasuries along with short-intermediate municipal bonds finished this past month in the green. Emerging markets debt as measured by the JP Morgan Emerging Markets Bond Index (EMBI) was among the weakest of the major bond sectors.

Commodities were broadly lower this month. Gold, silver, natural gas, and crude oil prices declined with silver down over 10%. The exception was copper, which saw a return of more than 1% this month.

US and International Economic Data Recap 

The Federal Reserve communicated following its September meeting that it’s committed to continuing to use monetary policy tools to support the economic recovery. The Federal Open Market Committee (FOMC) stated that short-term rates would remain targeted at 0% to .25%. Rates could stay anchored near zero until 2023 or beyond unless inflation rises consistently.

The US unemployment rate remains high compared to history. COVID-19 has played an adverse role on service industry employment. Even though the unemployment rate has dropped to near 8% from a peak of approximately 15%, we are quite a ways from having an economy at full employment. The final eventual approval of a COVID-19 vaccine should help the service industry, and thus our employment landscape.

US consumer spending slowed in August mainly because extended unemployment benefits ended. August core retail sales fell .1% as well compared to an expected increase of .9%. Given that progress on additional stimulus legislation has stalled, September retail sales may show a decline, as they did in August.

Looking Ahead

The election is expected to be a major theme in October as Election Day approaches. In addition, we’ll start to receive corporate third quarter earnings. Market participants will be focused on forward guidance among concerns about the direction of the economic recovery.

Progress on a second round of stimulus, which has been viewed as a low-probability event by many investors, would be quite welcomed, and given the recent employment report, could be on the table. Any changes in the spread of COVID-19 as the weather gets colder will be monitored closely, while positive progress on a vaccine may be cheered by markets.

 

IMPORTANT DISCLOSURES This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. All market and index data comes from FactSet and MarketWatch. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. U.S. Treasuries may be considered “safe haven” investments but do carry some degree of risk including interest rate, credit, and market risk. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. For a list of descriptions of the indexes referenced in this publication, please visit our website at lplresearch.com/definitions. This Research material was prepared by LPL Financial LLC. Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates.  To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity.. Not Insured by FDIC/NCUA or Any Other Government Agency, Not Bank/Credit Union Guaranteed, Not Bank/Credit Union Deposits or Obligations, May Lose Value. For Public Use – Tracking 1-05063613