Market Update - September 8th, 2020

Economic data last week included mixed but generally pointed to expansion for manufacturing and services releases, as well as a better-than-expected employment situation report for August.

U.S. and foreign equities both fell back last week, as growth stock strength reversed. Bonds ticked up slightly, although stronger economic data sustained interest rates. Commodities fell broadly, led by lower pricing for crude oil and demand continues to remain weak.

U.S. stocks fell back last week, as early strength gave way to sharp pullbacks on Thursday and part of Friday, as discussed earlier. By sector, only utilities and (oddly) materials provided positive returns; energy and technology led the market downward, with negative results of over -4%. Real experienced minimal losses, which outperformed equities broadly.

Foreign stocks in both developed and emerging markets declined in similar magnitude with U.S. equities. There are signs that additional European stimulus could be in the works from a variety of angles, both broadly by the ECB and specifically by individual nations, such as France. However, this positive sentiment has been soured by a slimmer probability of a productive Brexit deal by year-end.

U.S. bonds ticked up slightly, although a yield recovery by Friday tempered larger gains one would expect when equity markets fell back. This was perhaps due to better economic expectations following a strong jobs report. Both U.S. treasuries and investment-grade corporate bonds gained a quarter-percent, while high yield and bank loans each lost ground. Foreign debt was held back by a sharp rally in the U.S. dollar last week, with developed market debt reporting net losses and emerging market bonds little changed.

Commodities generally fell back last week, not helped by negative risk asset markets and a strong dollar. Energy and precious metals led the decline, while industrial metals and agriculture were little changed. The price of crude oil fell by only a few dollars, but amounted to -7%, to just under $40/barrel. The Saudis cut prices for October with signs that broader energy demand remains under pressure.