by William Henderson, Vice President / Head of Investments
For a week with a lot of big news events: super-successful IPO of Snowflake, Big-10 Football starting up again and the sad news of Supreme Court Justice Ruth Bader Ginsburg dying; the Dow Jones Industrial Average changed a whole 0.1% over the week ended September 18, 2020. That is not to say we didn’t have some big swings in the market during the week; and the broader markets did close down for the week with the S&P 500 (0.60%) and the Tech-Larded NASDAQ (0.60%). Year-to-date returns remain mixed running in the face of some truly epic headwinds with the DJIA (3.1%), the S&P 500 +2.8% and the NASDAQ +20.3%. The markets continue to hope for something beyond the Fed’s open spigot of free money and believe Washington will finally agree on the next round of fiscal stimulus. In that regard, watch for Washington to be solely focused this week on a battle to replace Ruth Bader Ginsburg on the U.S. Supreme Court. There was interesting news from the U.S Commerce Department on Friday in an order prohibiting certain transactions of two Chinese e-commerce giants, Tencent’s WeChat and ByteDance’s TikTok. This is all part of the continuing U.S./China trade negotiations. Oracle & Wal-Mart are still in talks to buy the U.S. operations of TikTok but have yet to resolve the final details; even after receiving approval from President Trump.
The Fed’s two-day policy meeting wrapped up on Wednesday with Fed Chair Jerome Powell revealing that policymakers expect official short-term rates to remain near 0% through 2023 and tempered their expectations for the size of the economic contraction in 2020 from 6.5% to 3.7%. Mr. Powell seemed concerned that the Fed’s massive monetary accommodation may be reaching its limits and instead began calling on Washington for a stronger fiscal boost to aid the economic recovery.
In more local news, Governor Wolf loosened restrictions on gatherings, specifically allowing restaurants to operate at 50% capacity rather than a paltry 25%. While not a full-blown removal of COVID-19 related restrictions, it does point to a lessening impact the global pandemic is having on the economy. A vaccine is still underway, with many global companies moving into a vaccine trial phase. Along with the explosion in virtual conferencing and working from home, cash usage is taking a dive while electronic payments are on the rise. According to an article in Barron’s this weekend, the volume of ATM withdrawals tumbled more than 12% in the second quarter. Companies that provide services allowing electronic payment transactions will continue to grow and benefit. As we saw the bank building replaced by the ATM, will we see the ATM replaced by the smartphone? Perhaps by the next generation.
It could be a tumultuous week with so much uncertainty abounding: 1) Washington (additional stimulus plan, replacing RBG), 2) Wall Street (TikTok, economic data, Fed) and 3) Main Street (Presidential Election, social unrest, COVID-19 resurgence in the fall). Remember, the markets hate uncertainty and we have a lot of that around these days. Keep a long-term view on your financial plans and try and look past the noise.