Stock markets closed down for the week, weighed down by the continued uncertainty surrounding the upcoming U.S. election, the timing and scope of another relief bill, escalating COVID-19 case numbers, and the contentious Brexit negotiation. Although the run-up from the March market low continues to impress, the Dow Jones Industrial Average year-to-date performance number slipped back into negative territory this week. Looking beyond all of the current uncertainty, a number of positive indications give hope for the durability of the recovery.
For the week, the S&P 500 Index closed down 0.9% and the Dow Jones Industrial Average declined 1.0%. Year to date, the S&P is up 7.3%, while the Dow is down 0.7%. First-time unemployment claims fell more than expected this week to 787,000, and continuing claims again fell more than expected to 8.4 million. In recent weeks, the labor market has continued the “two steps forward, one step back” dance back to its pre-pandemic, full-employment level. While the trend continues to be positive, the pace of job recovery remains frustratingly slow. The conundrum facing leaders is the trade-off between further reopening and the accompanying elevated case levels that typically result.
Positive health and economic developments do provide promise for a brighter future. While a viable vaccine still remains some ways off, the use of therapeutics has advanced. This week, the FDA approved Gilead’s remdesivir as a COVID-19 treatment – which has already helped numerous coronavirus patients in their recovery, including President Donald Trump. Several European bank and automotive companies reported surprisingly positive earnings, and German manufacturing production for September was strong. While the manufacturing strength mirrors recent U.S. trends, concern that the recent spike in coronavirus cases in a number of key European countries could result in more stringent lockdowns is a significant potential headwind.
Chinese third-quarter GDP growth was reported at 5%; while slightly lower than expected, it is a sign that the world’s second-largest economy has significantly rebounded.
Next week, the first look at U.S. third-quarter GDP growth is scheduled to be published. As mind-bogglingly negative as the second-quarter number was, anticipation is growing for a just-as-remarkable positive number in the third quarter – somewhere on the order of 30-35% (annualized)! The continued resiliency of so many American businesses to operate through unprecedented challenges, along with prospects for sustained low interest rates and additional fiscal relief, continues to inform our expectation that stocks are well positioned to outperform other asset classes over the next few years.
We are committed to providing timely and actionable communication to our clients. If you’re looking for more financial insights, check out our detailed quarterly investment commentary. You also might be interested in two other new articles on our blog that address practical matters. One post offers tips on leveraging health savings accounts to save for retirement, while another article covers the ins and outs of avoiding cyber scams. As always, please reach out with any questions. We are here for you!