September this year has proven to be not the favorite month for investors so far in 2020. Last week that trend continued with the S&P 500 down .6% and the Dow off 1.7%.
Let’s look at both the good and the bad for last week and what the drivers were. First the bad:
- Investors Catch Breath. Some of the volatility in September has been investors taking profits from the preceding months, essentially as will happen from time to time taking a “breather.”
- A FAANG Reversal. During most of the rally this year, five companies in the S&P 500 (Facebook, Amazon, Apple, Netflix and Google) have outperformed the other 495 companies in the S&P 500. In September that reversed itself, with the FAANG stocks significantly underperforming the rest of the market. Investors who are disproportionately concentrated in those tech stocks may have felt the sting of September more than others.
- Coronavirus Uncertainty. Reports last week of a second wave in Europe were discouraging.
- No Government Shutdown. There had been worries about a possible government shutdown. On Wednesday, however, the House passed a continuing resolution to replace federal funding set to expire the following week, with passage by the Senate expected in the coming days.
- New home sales in August reached their best level since September 2006. This is not just good news for real estate brokers, but a strong indicator of overall consumer confidence.
- Manufacturing continues to surge, albeit it at a somewhat slower pace than when the economy first reopened. As companies continue to refill inventories that they had allowed to be depleted during the worst of the shutdown, these manufacturing numbers should remain strong.
Markets will always have volatility, but the more normal ebb and flow of stock prices that we have seen in the past month are in welcome relief to the wild fluctuations back in the Spring. Our focus, of course, remains not on short-term headlines but on helping you achieve your long-term financial goals.