Rising COVID, Falling Stocks

October 30, 2020

October has a bad reputation as it has been the home of numerous market “crashes”, but after a tough September the market got off to a good start on hopes for more stimulus.  The stimulus talks in Congress drove the market higher in the early going with the S&P 500 hitting a high for the month on the 12th.  The last half of the month featured back and forth negotiations between Pelosi and Mnuchin that ultimately resulted in no deal.  The market believes the economy needs more stimulus to get through this pandemic, so the realization there would be no deal until after the election was greeted with selling.  The last week of the month the selling intensified as rising COVID cases caused shutdowns in Europe and a pause in our recovery.  At the end of the month the S&P 500 had lost 2.8% and is now up just 1.2% for the year.  

The month began on a Thursday and on Friday we learned President Trump had contracted COVID.  The initial uncertainty sent the S&P 500 down .4%.  We began the first full week of the month with news that President Trump was recovering nicely, and stimulus talks were progressing.  On Tuesday President Trump told Republican negotiators to stop stimulus negotiations until after the election, but on Wednesday he tweeted his desire for a “targeted” stimulus aimed at those areas most in need.  Hopes for some type of stimulus drove the market to the best week of the month with the S&P 500 finishing with a gain of 3.9%.  The second full week of the month got off to a good start on the belief Biden’s lead would help avoid a contested election, one of the market’s worst fears.  Apple introduced their new 5G iPhone and retail sales for September were more than double expectations.  A breakdown in stimulus talks put a damper on an otherwise good week for the economy and reduced the S&P 500 gain for the week to just .2%. The third week was a back and forth affair with daily news on the stimulus negotiations.  By the end of the week the stimulus talks had turned sour and the S&P 500 lost .5% for the week.  The final week of the month showed a global spike in COVID cases that had France, Germany and a few U S states instituting more shutdowns.  Concerns these shutdowns will become more widespread sent the S&P 500 down 5.6%, its worst week since March. 

Market action in November is going to be dictated by the election.  Due to the high degree of uncertainty we have been raising cash since early September.  It appears the market would like to see Biden win as that would likely mean more aggressive stimulus, sugar now, diabetes later.  However, the market is also concerned a Biden win could result in a stimulus stalemate during the lame duck session that would delay additional stimulus until 2021.  A Trump win would likely mean tougher stimulus negotiations.  So, in the short term, the market may get a short term pop out of a Biden win and may decline on a Trump win.  One of the market’s biggest concerns is a contested election that would drag on for weeks and result in finger pointing, lawsuits and potential Supreme Court involvement.  Another uncertainty is government reaction to the expected rise in COVID cases.  Therapeutics have lessened the severity of the virus, so we are hoping shutdowns will be minimal and targeted.  The uncertainty may create a buying opportunity that we will embrace. 

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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