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IM Wealth Partners Q4 2020 Market Update

November 03, 2020
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The year 2020 will continue to surprise us and staying abreast of the latest important information is paramount. Below the Executive Summary, you will find greater detail.

Executive Summary

  • The beat went on in the 3rd quarter as Growth stocks once again were the bright spot, propelling the S&P 500 Index to a 9% gain.
  • The market continues to have a narrow focus, with the S&P 500 Index being carried by a relatively small number of companies.
  • However, September was largely a risk-off month characterized by an underwhelming Federal Reserve meeting, lack of progress on a 2nd stimulus package, and concerns over a contested election.
  • Bond yields were relatively unchanged over the entire quarter demonstrating stability, particularly in the high-quality segment of the market.
  • Despite this year’s uncertainty regarding the outcome of the Presidential election, history has shown us generally positive annual stock returns during election years.*
  • The residential housing market has rebounded since the Spring due to low mortgage rates and limited inventory.

 

Supplemental Commentary:

 

A September to Remember

 

The S&P 500 Index (green line) bounced intra-month in September but the trajectory remains the same since the March lows. A handful of large Growth companies have been spearheading the moves. But if you were to equal weight the companies in the Index (white line) the returns are not as robust.

 

Big Tech vs. The World

The market capitalization of large technology companies (think Apple, Facebook, Amazon, etc.) now accounts for approximately 45% of the S&P 500 Index and 15% of the world’s GDP.  Astonisgh

 

Average S&P 500 Index Returns During Election Years

Looking at stock market performance through a slightly different lens, the chart below highlights the average performance of the S&P 500 Index around U.S. Presidential elections dating back to 1972. It looks at returns both before and after Election Day.  It does, however, exclude 2008 due to the Great Recession.

A Wall of Cash

Cumulative flows into money market funds highlight a record amount of cash sitting on the sidelines.  Think of this as dry powder ready to be put to work into risk assets.

Source:  EPFR, Hartford Funds

 

Shrinking Supply in the Housing Market

With residential mortgage rates at historic lows and housing inventory at multi-year lows, the housing market (and home prices) have experienced a material rebound this year.

 

 

* Disclaimer:  Past performance does not guarantee future results.