Your Weekly Update for Monday, September 14, 2020.
Beacon Rock Wealth Advisors is a financial planning and registered investment advisory firm in Camas, Washington. We are always available to answer your finance questions. Give us a call at (800) 562-7096 or send an email to[email protected].
With this volatility in the markets you may have questions about your portfolio.Ā We are both available by Zoom or Skype to answer your questions. Call or email and we will get it set up.
Please support your local small businesses. Go get some take-out from your favorite restaurant!
If you or someone you know is worried about retirement, send us and email or give us a call for a no-obligation Retirement and Social Security Analysis.
If you find this information useful, please forward this newsletter to a friend and ask them to subscribe at https://newsletters.beaconrwa.com/subscribe.
Have a great week!
Mike Elerath
CERTIFIED FINANCIAL PLANNERTM
CERTIFIED IN LONG-TERM CARE
NATIONAL SOCIAL SECURITY ADVISOR
Bill Roller
NMLS #107972
CHARTERED FINANCIAL ANALYST
CERTIFIED FINANCIAL PLANNERTM
CHARTERED MARKET TECHNICIAN
For more information about Beacon Rock Wealth Advisors, check out our brochure here:Ā https://beaconrwa.com/wp-content/uploads/2020/04/BeaconRockBrochure.pdf
Please support Bridge The Gap, a non-profit in Vancouver, WA that is building a brighter future for children in foster care during Give More 24 on September 24, 2020 at https://www.givemore24.org/organizations/bridge-the-gap
Ā 
Summary
Markets had a tough week last week. The Dow Jones Industrial Average fell 1.66% to 27,665.64, while the S&P500 fell 2.51% to 3,340.97. The Nasdaq Composite fell 4.06% to 10.853.55. The annual yield on the 30-year Treasury fell 5.3 basis points to 1.417%.
On a holiday-shortened week, economic data included a tick upward in producer and consumer inflation, although levels remain tempered. Employment data remained mixed.
U.S. equity markets declined last week, as profit-taking in certain higher-growth stock groups continued. Foreign stocks outperformed domestic stocks slightly, along with improved economic prospects. Bonds gained due to inflows from riskier assets, led by investment-grade debt. Commodities were mixed to lower, as priced for crude oil and natural gas continued to show weakness.
Economic Notes
(0) The producer price index for August rose by 0.3%, beating expectations by a tenth of a percent. Removing food and energy from the calculation, core PPI gained 0.4%, which was largely led by an increase in medical care prices (up over 0.5% for the month). Prices for crude materials aside from food and energy rose 1.7%, pointing to a combination of higher demand and possible shortages. Overall, this brought the year-over-year change in PPI to a still-negative -0.2%.
(0) The consumer price index in August rose by an upwardly-rounded 0.4% on both a headline and core basis, the latter excluding food and energy prices. These were just a bit higher than expectations. This was despite energy commodities rising 2.0% for the single month, as well as a 5% one-month spike in the price of used cars (due to supply constraints). On the other hand, deceleration was seen in the areas of shelter, medical care, and education. Over the trailing 12 months, headline and core CPI increased 1.3% and 1.7%, respectively. The last yearās prices have largely been led by food, shelter, used cars, and medical care, up several percent each, in keeping with unique issues in this unique year. However, these gains were offset by -17% declines in the prices for energy commodities, and weakness in some retail goods. The inflation pace of the past three months, however, is the fastest pace in 12 years, which is in keeping with a degree of economic recovery.
(+) The government JOLTS job openings report showed an increase of 617k to 6.618 mil. in July beating expectations calling for an even 6.000 mil. The job openings rate rose by a strong 0.3% to 4.5%, followed by the quits rate rising by 0.2% to 2.1%. On the other hand, the layoff rate fell by -0.2% to 1.2%, and hiring rate fell a full percent to 4.1%. This was considered a decent report, although rehiring levels remain depressed.
(0/-) Initial jobless claims for the Sep. 5 ending week were largely unchanged at 884k, which was higher than the consensus estimate calling for 850k. Continuing claims for the Aug. 29 week rose by 93k to 13.385 mil., which surpassed forecast estimates of 12.904 mil. Claims data was largely divergent by state, with decreased claims in the South where activity seemed to be picking up, while claims in TX and CA roseāthe latter likely driven by wildfire activity seen throughout the West. Claims levels nationally remain elevated, which has frustrated some economists, but reflects a reality of difficulty in getting businesses and consumer spending restarted in the absence of a clear end to the pandemic in the coming months, at least.
Market Notes
| Period ending 9/11/2020 | 1 Week (%) | YTD (%) |
| DJIA | -1.61 | -1.34 |
| S&P 500 | -2.49 | 4.80 |
| Russell 2000 | -2.45 | -9.40 |
| MSCI-EAFE | 1.45 | -5.21 |
| MSCI-EM | -0.70 | -2.05 |
| BBgBarc U.S. Aggregate | 0.25 | 7.03 |
| U.S. Treasury Yields | 3 Mo. | 2 Yr. | 5 Yr. | 10 Yr. | 30 Yr. |
| 12/31/2019 | 1.55 | 1.58 | 1.69 | 1.92 | 2.39 |
| 9/4/2020 | 0.11 | 0.14 | 0.30 | 0.72 | 1.46 |
| 9/11/2020 | 0.11 | 0.13 | 0.26 | 0.67 | 1.42 |
The equity sell-off from the prior week continued past Labor Day, with the tech- and healthcare-heavy Nasdaq experiencing one of its quickest (3-day) -10% corrections in history. This appeared to be due to investors rotating out of stronger-momentum tech names toward more conventional large cap core. This negative trend slowed by mid-week, although mixed intraday results continued. By sector, materials ended the week as the only segment with positive returns, while energy, technology, and communications services all experienced declines in the low single-digits. Real estate also fell back by several percent for the week.
Some of the weakness in sentiment may have also been affected by the decelerating likelihood of a large Congressional stimulus package before the election, as well as the pause in AstraZenecaās Covid vaccine trial, due to an unspecified unfavorable result being investigated (rumor has it that it might be an unrelated issue, but markets are touchy these days, nonetheless). Additionally, the larger that certain individual names become in an index (5% specifically), there could be an impact on reporting requirements for regular diversified mutual funds and other investment vehiclesāwhich could be a reason for stock weightings around this level getting ācappedā through market movements.
Foreign stocks were mixed by country last week, with developed markets generally experiencing gains, while emerging markets declined by just short of a percent. Sentiment was a bit stronger abroad, with economic growth looking better by several metrics; this was despite the ECB not providing additional stimulus as hoped, as well as continued rising infections in several countries. Chinese improvements in exports were offset by continued weak sentiment around U.S. restrictions on technology operations, which resulted in sharp equity declines.
U.S. bonds gained with the movements in flow away from risk assets, causing a decline in interest rates. Longer-duration treasuries fared best, followed by investment-grade corporates. Floating rate bank loans also gained. Developed market foreign bonds were flat on the week as the U.S. dollar strengthened, while emerging market bonds lost ground.
Commodities generally fell across the board, along with weaker risk assets and a stronger dollar. Lower energy prices overwhelmed nominal change in other groups, largely with natural gas spot prices falling over -12%, due to lower demand and a correction backward from a prior hurricane-related spike. The price of crude oil declined by -6% to just over $37/barrel, in a continued reaction to Saudi price cuts in order spur better demand.
Mortgage Rates
āMortgage rates have hit another record low due to a late summer slowdown in the economic recovery,ā said Sam Khater, Freddie Macās Chief Economist. āThese low rates have ignited robust purchase demand activity, which is up twenty-five% from a year ago and has been growing at double digit rates for four consecutive months. However, heading into the fall it will be difficult to sustain the growth momentum in purchases because the lack of supply is already exhibiting a constraint on sales activity.ā
The 30-year fixed-rate mortgageĀ averaged 2.86% with an average 0.8 point for the week ending September 10, 2020, down from last week when it averaged 2.93%. A year ago at this time, the 30-year FRM averaged 3.56%.
The 15-year fixed-rate mortgageĀ averaged 2.37% with an average 0.7 point, down from last week when it averaged 2.42%. A year ago at this time, the 15-year FRM averaged 3.09%.
The 5-year Treasury-indexed hybrid adjustable-rate mortgageĀ (ARM) averaged 3.11% with an average 0.2 point, up from last week when it averaged 2.93%. Ā A year ago at this time, the 5-year ARM averaged 3.36%.
Freddie Macās Primary Mortgage Market Survey is focused on conventional, conforming, fully-amortizing home purchase loans for borrowers who put 20% down and have excellent credit. Average commitment rates should be reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage. Visit the following link for theĀ Definitions. Borrowers may still pay closing costs which are not included in the survey.
Through our relationship with Prestige Home Mortgage in Vancouver, Washington we originate residential and reverse mortgages. Check us out at https://beaconrwa.com and our affiliated websites atĀ https://reverse-mortgages.us and https://socialsecurityquestionsanswered4u.com.
Sources: Ryan Long, CFA, FocusPoint Solutions, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Citigroup, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Marketfield Asset Management, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, PIMCO, Standard & Poorās, StockCharts.com, The Conference Board, Thomson Reuters, T. Rowe Price, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wall Street Journal, The Washington Post. Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends. Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.
The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness. All information and opinions expressed are subject to change without notice. Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product. FocusPoint Solutions, Inc. is a registered investment advisor.
Notes key: (+) positive/encouraging development, (0) neutral/inconclusive/no net effect, (-) negative/discouraging development.