Overdue Correction

October 1, 2020

Technology stocks helped push the S&P 500 nearly 60% above the March low and, as we suggested in our last monthly update, the market was overdue for a correction and we speculated September, historically the worst month of the year for stocks, might be a place we would see that.  We did get a correction in September, but we did not expect the S&P 500 to move lower every week during the month.  An overdue correction in technology stocks led all the major indices to losses during the month, with the tech heavy NASDAQ getting the worst of it.  Corrections are a normal part of the market cycle and, one could argue, they are not only inevitable but a healthy part of a long-term advance.  Thanks to a month end rally the S&P 500 lost just 3.9% and is still up 4.1% for the year.  The tech heavy NASDAQ ended the month with a loss of 5.2%.  Gold was 4% lower and oil dropped 7%. 

The month got off to a good start with technology stocks leading the S&P 500 to a new all-time high on the 2nd, but the selling began on the 3rd with an 8% drop in market leader Apple, its biggest drop since the pandemic began.  The selling continued into the 4th with the S&P 500 ending the first 4 days with a net loss of 2.3% led by a 3.3% loss for technology stocks.  The first full week of the month was shortened by the Labor Day holiday, but began where last week ended, with technology dropping 3%.  On Wednesday a rebound rally gave the S&P 500 its best day in 3 months but selling in large cap technology continued for the remainder of the week, sending the S&P 500 to a loss of 2.5%.   After losing nearly 8% in just 4 trading days, we started the second full week with a rally in technology stocks as some were seeing value. On Thursday the Federal Reserve said they were going to keep interest rates low for a prolonged period and urged Congress to provide more stimulus.  This made some wonder if things are worse than they look, and renewed selling sent the S&P 500 to a .6% loss for the week.  The last full week of the month began with talk about England once again shutting down their economy due to rising COVID cases and that sent the market sharply lower.  Most market participants expect us to learn to live with the virus, not shut down again.  The housing sector continues to be strong and great earnings from Dow component Nike helped mitigate some of the selling and a strong rebound on Friday left the S&P 500 -.6% for the week.  We ended the month with a nice rally on hopes for more stimulus.  

October has a bad reputation as it is the home of 4 of the largest market declines in history.  However, the month closes with a gain nearly 60% of the time and the average return is +.8%.  The biggest difference this year is a tightly contested Presidential election that could change the direction of the country and impact the markets.  As a result, we have been raising cash ahead of the election.  When the market experiences significant selling we see sharp declines not only in equities, but also in the shares of low volume fixed income securities that cannot handle a high level of selling.  We have been raising cash over the past month by selling those securities.  If the market likes the election results and moves higher, we will still have most of our equity exposure.  However, if the market does not like the results of the election and heads lower, we are going to be in a position to buy at discounted prices.  We believe it is prudent to be defensive ahead of the election. 

If you know someone who would be interested in learning more about Greenberg Financial Group, or who is retired or thinking about retiring, or would simply like us to review their current portfolio, please contact us at 520-544-4909, or visit our NEW website at www.greenbergfinancial.com. As always, the key to successful investing is to have a portfolio that is consistent with your investment objectives and risk tolerance. We invite you to listen to our weekly Money Matters radio show which airs every Sunday Morning from 8:00 AM to 10:00 AM on KNST AM 790.  You can also listen to us on iHeart radio. You can follow us on Twitter @gbergfinancial or on Facebook under Greenberg Financial Group. 

 

 

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