by William Henderson, Vice President / Head of Investments
That was quite a week. All three major market indices were down last week with the Dow Jones Industrial Average down -6.5% Standard & Poor’s 500 Index down – 5.6% and the NASDAQ down -5.5%. Technology led the averages lower even after four powerhouse firms beat earnings estimates: Apple, Amazon, Facebook and Google all topped analyst’s estimates but they also collectively spoke of lower guidance on revenues and slower growth going forward. Another piece of positive news that failed to give the markets a boost was the release of the 3rd Quarter year-over-year U.S. GDP at an astounding 32%. Offsetting the positives were across the board and around the world spikes in COVID-19 cases. Of course, we have the Presidential Election ending Tuesday evening. Finally, we will put to rest one of our unknowns for 2020.

Equity markets have been whipsawed this year, first staging the fastest the bear market on record in March before rallying to a staging a rebound not seen in 90 years. We have seen this volatility previously. Large swings were also a common feature of the 2008 financial crisis. In 2008, there were 42 trading days where the S&P 500 moved by more than 3%. So far in 2020, there have been 28 days where the S&P 500 has swung by 3% or more. Clearly, our collective unknowns that we frequently cite, continue to roil the markets.

The housing market continues to boom; and, by most measures, activity in the housing sector is running at its highest level since 2007. Thankfully, this is a rebound from Spring, when COVID-19 lockdowns all but halted activity in the sector. Record-low mortgage rates, demographic tailwinds, and a general movement out of urban locales into suburban regions continue to fuel the boom. The housing boom fuels related sector growth as well such as landscaping, appliances, carpentry, plumbing and HVAC, and household electronics. A strong housing market is an excellent base for a continued economic recovery into 2021 and beyond.  

With the markets being down so much last week, it is difficult to believe there are green shoots in our economy; however, looking at the fiscal and monetary stimulus alone, things are firmly in place for an economic rebound. Add to this any possibility of a COVID-19 vaccine in 2021 and the economy could see dramatic growth as the power of the consumer will finally be unleashed.  The election will decide the next President of the United States, but one person remains in office continuing to be extremely important to the financial markets – Jerome Powell. Mr. Powell is committed to keeping rates low for a long time. Low rates are fueling the housing boom (as mentioned above) allowing healthy firms to borrow at record-low levels, thereby improving their balance sheets and reducing the net interest expense of the federal debt.