October Investment Bulletin

Bill Norris
October 05, 2020

Stay current on what’s happening in the economy to help you better understand how the financial news relates to your investments.

September key drivers

  • The advance in global equity markets paused in September with the S&P 500 declining more than 3%, NASDAQ down more than 5%, and MSCI EAFE losing more than 2%. Given the surge in equities over the summer leading into September and the fact that September tends to be challenging month for stocks, this pause is not surprising. Headwinds during the month continued to come from concerns over the strength of the global recovery, renewed outbreak of COVID-19 in various countries and expectations for another stimulus package.•Congress again failed to deliver on a new stimulus bill after returning to Washington, preferring to focus on a stopgap bill that allowed the government to continue operating past September 30. The House and Senate remained far apart in terms of their views on another stimulus package. Investors are increasingly concerned that without another bill, the momentum in economic recovery will slow materially.
  • Economic data in the US remained mixed, but overall, suggest a slower rate of recovery. Data released during the month indicated an improvement in consumer confidence offset by sluggish manufacturing and a struggling labor market. September non-farm payroll growth was less than expected. The gains in consumer confidence were driven by expectations for improvement in the job market as the economic recovery continues.

What to watch in October

  • Investors are holding out hope for an agreement between the House and Senate for another stimulus bill that could help individuals, small business, state and local governments and the overall economy. On the last day of September, there was a glimmer of hope that a compromise could be reached. If this fails, the odds of another shot at an agreement could be extremely low.•Q3 earnings season will begin in early October. With companies, for the most part, reporting better results in Q2 than expected, expectations for continued improvement have increased. However, according to FactSet, as of October 2,  S&P 500 earnings are expected to decline by more than 22% in Q3. There has been some recent data that suggest we could see better-than-expected results in Q3, with 60% fewer companies in the S&P 500 issuing negative guidance for the quarter vs. longer-term average, according to FactSet.
  • Investors cannot look ahead to October of 2020 without focusing on the presidential election that kicks into high gear over the next 30 days. Based on market reaction in late September after the first debate, it is apparent that we will probably see higher volatility as investors parse through polls, additional debates and look ahead as to what the outcome of the election could mean to the economy heading into 2021.

 

Global asset class total returns through 09.30.2020

Global asset class total returns through 09.30.2020

 

Bill Norris is chief investment officer and head of asset management for CIBC Bank USA. In this role, he oversees investment management, trust and estate services to individual and institutional clients of CIBC Bank USA. Bill also serves as a member of CIBC Private Wealth Management’s Asset Allocation Committee with more than 35 years of industry experience.

 

CIBC Private Wealth Management includes CIBC National Trust Company (a limited-purpose national trust company), CIBC Delaware Trust Company (a Delaware limited-purpose trust company), CIBC Private Wealth Advisors, Inc. (a registered investment adviser)—all of which are wholly owned subsidiaries of CIBC Private Wealth Group, LLC—and the private wealth division of CIBC Bank USA. All of these entities are wholly owned subsidiaries of Canadian Imperial Bank of Commerce.

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