Heritage Financial Advisory

The Major Markets skyrocketed last week. In fact, pretty much every major equity index climbed higher. The greatest gains were in the NADSAQ as the tech index added nine percentage points.

This was even more apparent at the sector level as the S&P 500 Information Technology sector posted an even larger gain with a return of 9.70%. The only sector that ended under a single percentage point higher was energy as the sector was pulled down do to weakness in Natural Gas.

Last week opened higher and climber with each subsequent day before pausing Friday as the S&P 500 ended virtually flat on the day. The weekly gain in the S&P 500 marked the largest gain since April and the third largest weekly gain for the year.

While some may have attributed the gains to results of last week’s election, half the gains were made before the polls closed Tuesday night. On that note, the results of the 2020 election will likely continue to make headlines for the rest of the year.

No-doubt you are already aware that as of election night, no clear winner of the presidential election had been declared . Both candidates declared themselves as the eventual winner Wednesday . And as the week wore on, Former Vice President Joe Biden appeared to narrow the gap to the required 270 electoral votes needed to be declared president. Over the weekend, various news agencies declared him the winner and the President Elect of the United States. 

President Trump promptly declared that lawsuits would be filed in various states as allegations of inaccuracies and shenanigans began to swirl . This was compounded by the unusually large use of mail in votes and a court case that allowed votes to be received through Friday in Pennsylvania.

The intent of all this context is not to speak to the validity or the merit of the current claims of either candidate, but to highlight the political situation that may impact the markets between now and when the president will be sworn in in January.

Additionally, the races in the House and the Senate ended mixed. Democrats look likely to pick up one seat in the Senate with a run-off election in Georgia likely to take place January 5th which should resolve which party has the majority. Meanwhile, the Democrats look likely to lose 4 seats in the House with the Republicans likely to pick up 5 seats, narrowing the Democrat majority in the House.

This new political environment is likely to make the prospect of a massive stimulus bill, significant changes to tax rates, and modification to existing health-care laws a non-starter in Washington for the immediate future. 

This week in the Monday Morning Market Minutes Mike discusses the big vaccine news from Pfizer that has the market moving higher. 

The Major Markets saw the gains bleed away last week after three consecutive positive weeks in the domestic market. The greatest losses appeared in the Technology centric Nasdaq. This was especially apparent at the sector level as the Information Technology Sector fell 2.2% This broke a four-week run after September’s pullback.  Optimism faded last week as neither the White House nor Congress could come to an agreement on another Stimulus Deal. Ironically, the gains after Monday’s initial drop were fueled at least in part in the hopes that Nancy Pelosi and Steven Mnuchin had narrowed their differences on a new bill.  However, political anxiety ramped up as Joe Biden’s son and Amy Coney Barrett’s supreme court nomination fueled an already tense week. Thursday’s presidential debate then served as the exclamation point to these events.  As tensions flared, the longer-term end of the yield curve rose. By Friday’s close, the ten-year treasury climbed 9 basis points while the 30-year rose 12 basis points.  The gains in interest rates supported financials which was one of the four segments of the S&P 500 which managed to close higher for the week by Friday. Yet the greatest gains were seen in the Communication Services Sector.  The S&P 500 Communication Services sector is the newest and one of the smallest segments based upon the number of companies of the Blue-Chip index. Launched only two years ago in September 2018, the sector was created to address the changing landscape of technology and telecommunications  Last week, Snap, one of the 26 constituents in the Communication Services sector, beat their earnings forecast when their report broke causing the company to surge 52% in just a week, dragging the overall sector higher.    This week, earnings season continues, hopefully serving as a productive distraction from the political horrors you may be feeling ahead of Election Day.

This week on the Monday Morning Market Minute, Mike breaks down some important newsworthy events this week in the markets. Rising Covid cases, no signs of stimulus, and a GDP report this Friday that will tell us what kind of shape the economy is in. Take a look and reach out to us with any questions. Happy Monday!

Join Lou Desepoli of Heritage Financial Advisory Group for the Heritage Market Update for the 4th quarter of 2020.

Join Mike Desepoli of Heritage Financial Advisory Group for the Heritage Market Update for the 4th quarter of 2020.

In this edition of M4, Mike Desepoli discusses 3 things the Heritage team is keeping an eye on this week in the markets in 1 minute or less.

Lou Desepoli of Heritage Financial Advisory Group provides the quarterly market update and outlook for July 2020.

Mike Desepoli of Heritage Financial Advisory Group provides the quarterly market update and outlook for July 2020.

The major markets experienced losses last week as US-China tensions and coronavirus concerns were renewed. The tech centric Nasdaq fell about the same as the MSCI Emerging Market index. Meanwhile, the Dow, S&P 500 and MSCI World Indices all fell down in the mid 2% range.

The losses were fairly consistent at the sector level with only Healthcare ending in positive territory for the week. Energy suffered the greatest losses but was followed closely by real estate.  The losses in the Energy sector were despite gains made in the GSCI Crude Oil Index totaling 8.63% for the week. It was the GSCI Natural Gas Index that was hit with a loss of 11.9% for the week.

Real Estate and Financials both suffered last week as the Mortgage Bankers Association reported  another increase in the weekly mortgage forbearance rate to 7.91% An increase was expected as a new month began and more borrowers requested forbearance on their home loans. Mike Fratantoni, MBA's Chief Economist and Senior Vice President of Research and Industry Technology, said that “FHA and VA borrowers have been most impacted by the job losses thus far, with the share of Ginnie Mae loans in forbearance at almost 11 percent.”

The economic instability has cause some to wonder if we might see negative rate in the Fed Funds Rate by next year. Midweek, Fed Chair Jerome Powell squelched the idea of negative interest rate in the U.S. stating, “The committee’s view on negative rates really has not changed. This is not something that we’re looking at.”

Finally, on Friday the U.S. Department of Commerce announced plans to restrict Huawei from using American made technology and software in its manufacturing of semiconductors. The rule change is set to go in effect in September. “Despite the Entity List actions the Department took last year, Huawei and its foreign affiliates have stepped-up efforts to undermine these national security-based restrictions through an indigenization effort.  However, that effort is still dependent on U.S. technologies,” said Secretary of Commerce Wilbur Ross.

This news echoes last years trade war headlines as the US, along with much of the world, looks to China for explanation for the handling of information and mitigation for the early days of the coronavirus pandemic.