- Strong End to Quarter. Despite a pickup in volatility and negative results in September, a strong July, and the best August performance in over three decades helped push most indices into positive territory on the full quarter. For the year, the S&P 500 is up nearly 6% as of September 30, a remarkable outcome considering the effects of the pandemic and its impact on the economy.
- One for the Books. From peak to trough, and the subsequent recovery, this was one of the sharpest and shortest bear markets in S&P 500 history. The rebound in equity markets, despite the pandemic’s lingering effects, can largely be attributed to the uncharacteristically swift and cooperative action of policymakers domestically and around the globe. The magnitude and breadth of policy measures dwarfed anything previously deployed by governing authorities. Here in the US, the Fed slashed interest rates and re-liquefied critical funding markets, while fiscal policy actions helped to steady businesses and households with emergency loans and direct support payments.
- Health Situation. A series of grim milestones reflect the pandemic’s sobering scope. Globally, the official death count from Covid has now crossed the one million mark, with over 200,000 deaths in the US alone. With the summer over, children across the nation have begun the new school semester. We are starting to see a move up in US virus cases, while parts of Europe are experiencing a worrisome resurgence as well. Importantly, fatality and hospitalization rates per infection have remained stable, despite the higher case counts. New infections are skewing to younger populations, and early identification and better treatment for Covid cases are helping outcomes.
- Round 2 of Fiscal Policy. The first round of fiscal stimulus, doled out at the depths of the pandemic, was critical in supporting the economy and stabilizing markets. Negotiations are currently ongoing for a new fiscal package to replace the prior one that has mostly expired. Given that several sub-sectors of the economy and households are still in a fragile condition, we believe it is a question of when, not if, a second package is passed, and what priorities between the political parties receive funding.
- The US election campaign is taking place against a historic backdrop of a pandemic, recession, and domestic strife. We maintain a politically agnostic view in our investment lives. Though the election is without question an important event, history has shown that markets are influenced more by the economic cycle and central bank policy, than which party is holding the White House.
- Portfolio Construction. Global activity is evolving toward cautious normalization, albeit with significant changes from prior. We think the worst of the economic impact from Covid may have passed. We believe a recovery is upon is, even if it feels unlike any other. To better cope with episodic volatility, we continue to favor companies with strong balance sheets and competitive positioning in their respective industry as the first line of defense. Our strategies are built for the long run, and designed to withstand most near-term uncertainties. We continue to maintain a watchful eye on the markets and economy on our clients’ behalf, and remain ready to act should facts and circumstances change.