Market Monitor: September Update
Headlines and Highlights
- President’s positive COVID-19 test magnifies election-related uncertainty: News that President Trump tested positive for the coronavirus injected a new level of uncertainty to the presidential race even as Joe Biden maintained an advantage in the mid-single-digit percentages in most polls. Public uneasiness about the likelihood of a disputed outcome has continued to grow, with millions of mail-in ballots likely to determine the winner in key battleground states.
- Stocks’ five-month winning streak ends: U.S. and international stocks endured their first monthly losses since March as investors turned cautious following a torrid five-month rally. The S&P 500 shed 10% over a three-week period – reflecting a fiscal stimulus delay, pre-election tension and the market’s more than 50% run-up since March – before finishing on the upswing to end the month with a stellar 8.5% gain for the third quarter. Bonds held steady while REITs fell.
- Recovery trudges forward: The economy continued to firm at a slower pace than in the snapback of late spring and summer, with most categories still hampered by the coronavirus yet strengthening. The housing market boomed, manufacturing improved and applications to start new businesses surged. The labor market’s gains tapered, however, with jobless claims and unemployment remaining historically high and layoffs mounting.
Selected Market Returns
Sources: Morningstar, Altair Advisers
- The economy has understandably decelerated since the better-than-expected speed of the recovery from March to September. We remain confident the recovery will keep advancing without a major reversal, boosted by eventual and ongoing government stimulus.
- A medical breakthrough that blunts the impact of COVID-19, whenever it comes, is the key factor that will determine the pace and timeline of this recovery. Based on multiple clinical trials that have shown encouraging signs, we view the base-case scenario is that mass distribution of a vaccine occurs by the summer of 2021.
- Market volatility can be expected until the election and likely beyond. We believe markets will be choppy but relatively range-bound through the end of the year. New coronavirus relief legislation in Congress – inevitable in some form, although the timeframe remains unclear – should mitigate much of the volatility.
- The election outcome has a significant chance to be disputed, which would create potentially weeks of doubt about the makeup of leadership in Washington and related questions about economic policies. We anticipate higher volatility while the election results are being debated. However, we expect the market to remain range-bound because a resolution ultimately will happen without a prolonged period of uncertainty and should at least be imminent or pending by year’s end.
- Stocks have come a long way since March, especially given the backdrop of a recession, but have the potential to move still higher into 2021. We believe the tailwinds provided by additional government stimulus and progress toward COVID-19 mitigation will ultimately offset short-term election volatility and other challenges.
The material shown is for informational purposes only. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities, and all investments are subject to the risk of loss. While efforts are made to ensure information contained herein is accurate, Altair Advisers LLC cannot guarantee the accuracy of all such information presented. Material contained in this publication should not be construed as accounting, legal, or tax advice