The market battled through another week of volatility whipsaws to finish higher for the first time in over a month. Septembers jobs report did not help the cause with fewer than expected jobs added despite a slight drop in the overall unemployment rate. Stimulus negotiations proved to be the main driver of price throughout the week as the market swung wildly in reaction to the different rumors. However, the end of the week was highlighted by the announcement from the White House of President Trump’s COVID diagnosis and then varying rumors over the weekend of his progress towards recovery. Find all of this plus more on the rising COVID concerns in this week’s Konvergent Market Blog.
Here are the top three things we’re covering this week’s blog:
The Market
The S&P was up 1.65% on another week of volatile price action. While rumors of a potential stimulus agreement between the White House and Democrats led the market higher early in the week, a mix of news headlines on Friday sent the market on a rollercoaster. Namely the tweet by President Trump late Thursday evening stating his positive COVID test which immediately dropped the Dow Jones 500 points in overnight trading[1]. So far, the news seems to be positive on his recovery and the market bounced early Monday in response.
Economic Data
New claims decreased ever so slightly last week to 837,000. This represents a drop of 36,000 over the previous week. Pandemic claims rose roughly the amount that new claims fell, bringing the total new claims to just under 1.5 million. While some positive progress has been made in unemployment, the slowing rate of change is a growing concern. Throughout the summer new claims were dropping by hundreds of thousands each week, now we are beginning to see the number flatten out.
Continuing claims came in at 11.767 million. This was a drop of nearly 1 million and provided some positive news on what was otherwise an underwhelming report.
Total Claims for Unemployment from all programs rose to 26.5 million. This continues to be a concern as there is little clarity on when the next stimulus package will be passed. With the virus season fast approaching, many are bracing for what could be a rough fall season for unemployment.
Septembers Job Report was released last Friday. The Unemployment Rate fell to 7.9%, the lowest level since the spike in April. This reading was slightly better than the expected 8.2%[2].
Nonfarm payrolls missed expectations, coming in at 661,000. Overall the jobs report was a disappointment, with almost all unemployment data seeing a deceleration in recovery. This will add to the already inflated volatility headed into the last month before the election.
Additionally, the ISM Purchasing Managers Index was released on Thursday and showed a marginal decline in September to 55.4%. After multiple months of spiking higher, the recovery in manufacturing is beginning to slow. While the drop off in March certainly accelerated the weakness of manufacturing, this number has been steadily dropping since mid-2018.
Consumer Sentiment was one of the lone bright spots with an increase to 80.4, the highest level since the COVID pandemic began. This was a strong improvement over August and better than the preliminary reading of 78.9[3].
COVID
Late Thursday evening news broke that President Donald Trump and First Lady Melania Trump have tested positive for COVID-19. Since then many have highlighted how contagious COVID is considering even the most protected person in the U.S. contracted the virus. With the election just over a month away, this will likely add to the uncertainty.
Outside of political implications, we may see a change in the way many Americans view the virus. There is potential that the Presidents positive test serves as a catalyst for increased preventative measures. Occurring at the same time is a resurgence of the virus in the U.S. Over the month of September, we have seen the summer drop in cases begin to level off as the virus season looms closer. The major headlines we are watching closely is the conversation of states shutting down once again as well as the stimulus package that could soften the blow.
Articles of Interest
Election Market Volatility – With a month until election day, Investors are beginning to fear the unknown. This has recently manifested itself through the large whipsaws seen in price action during the month of September. Check out this article to find out why so much uncertainly could spell further trouble for an already volatile market.
Stimulus Update – Another week of talks in Congress without a bi-partisan stimulus agreement. While it appears that Democrats and White House officials may be close to reaching a deal, Republicans claim they are still far apart. Check out this article[4] to see the specifics of what was negotiated as well as the impact President Trump’s diagnoses may have on the bill.
Stimulus Impact on Gold – Currently Congress is in a stalemate over the next stimulus package that could last for an extended period. Nonetheless, when a deal is finally reached it could have a significant impact on the market. Check out this article[5] to find out how a second stimulus package and more confirmation on the election could launch gold to new highs.
Social Media Post of the Week
While the stock market has enjoyed healthy gains since April many small businesses in the U.S. have not faired as well. See our post on an article from Visual Capitalist that may give you a different perspective on the stalled recovery many small businesses have faced.
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Non-Financial Story of the Week
I seem to write about my 9 year old, Lyla, every week! Last week brought another amazingly proud parent moment from her so I just had to tell it. Lyla loves math and has a lot of her dad’s competitive nature in her. She loves to complete math worksheets quickly and to win any math competition in her class. Last week they were doing a multiplication contest and it was down to Lyla and one of her classmates. Lyla was 3 answers ahead but ultimately lost to her very good friend, Sophia. Lyla was very upset at losing to the point of holding back tears, but still turned around and congratulated Sophia for doing an amazing job. I know how hard that was for her as she really does hate losing. However, it was a great learning experience and opportunity for us to reinforce that while losing is not fun, how you respond is what is most important and she was a champ at that!
Bottom Line
The market showed some signs of positivity as it attempted to push through the unpredictable headlines. Next week we will likely see additional volatility as stimulus negotiations intensify while the President recovers from his COVID diagnosis. With immense uncertainly ahead, you can feel confident that we will be keeping a close eye on everything so that your portfolio is protected from any unexpected events.
If you have any questions about any of the information in this week’s blog or what you should be doing right now with your personal and business planning, do not hesitate to reach out to us by sending an email to info@konvergentwealth.com or calling us at 253-236-7000.
[1] https://www.nbcnews.com/business/markets/dow-futures-plunge-more-400-points-trump-says-he-tested-n1241770?share=twitter
[2] https://www.cnbc.com/2020/10/02/jobs-report-september-2020.html
[3] https://www.marketwatch.com/story/consumer-sentiment-improves-in-late-september-and-hits-six-month-high-2020-10-02
[4] https://www.cnbc.com/2020/10/02/coronavirus-stimulus-trump-positive-test-changes-dynamic-pelosi-says.html
[5] https://markets.businessinsider.com/news/stocks/gold-could-soar-if-another-stimulus-is-passed-1029642044#