Week ending September 25, 2020
It was a stellar week for US economic news. Two regional Fed district manufacturing reports for September displayed continued strong growth in one case and a 66% monthly increase for the highest reading in two years for the other. The national Durable Goods report for August displayed a strong monthly gain with the dollar value of core capital goods now exceeding February’s level by 1.9%. Meanwhile housing, which has been leading the charge in the economy, turned in nothing short of spectacular numbers for August. New Home Sales came in at an annual rate of 1,011K versus July’s 965K which represented a 43.2% increase from a year ago; Existing Home Sales came in up 10.5% above year ago levels; it is important to appreciate housing was already strong in that year ago period. Finally, the “months supply” for both new and existing homes is at record lows; this all but guarantees continued strong activity in new home construction. Even more hopeful news came from a little reported statistic on new business startups; through September 15th, 3.2 million new businesses were started vs. 2.7 million as of September 15, 2019; of those businesses that would likely hire employees, some 1.1 million, that represents a 12% increase year over year- the most since 2007. Overseas saw the UK and Germany holding business levels at attractive recovery levels. However, the markets chose to focus on potential negatives; rising virus cases in the UK, France and certain northern plain states in the US, uncertainty over the upcoming US presidential election and a contentious US Supreme Court nomination process.
As a result, the heretofore correction in technology spread to a route in all asset classes sensitive to the new concerns for the economy. Therefore, the S&P 500, although fractionally negative, far outpaced all other equity asset classes, foreign and domestic with those categories down 3 to 4 times as much.
Bonds followed suit with Credit and Blend down 2 to 3 times Interest.
Commodities also followed suit with broad based losses.
All five strategies posted negative returns in excess of their proxies due to over-weights to more economically
sensitive equity and bond asset classes.
All three strategies posted negative returns in excess of their proxies due to allocations to more economically
sensitive equity sectors and bond asset classes.
We continue to remind market watchers that the hysteria over virus cases appears to be continually misplaced relative to the official benchmarks of hospitalizations and deaths and, thus, the potential for any serious curtailment of the economy. The US presidential election is entering its most fevered pitch with endless barbs, expose’s, posturing about validity and pundit speculation, which may cause further market volatility. However, for the time being, the economy is demonstrating its underlying pre-virus strength and, as a result, its resiliency to continue moving forward in recovery.
The TAG and RPg strategies remain allocated toward that growth outlook.
We welcome your comments and questions regarding the foregoing.
Please direct them to: support@riskparadigmgroup.com
Important Disclosures:
Risk Paradigm Group, LLC (RPg Asset Management or RPg) is a registered investment advisor with the U.S. Securities and Exchange Commission (SEC). Tactical Allocation Group (TAG) joined Risk Paradigm Group, LLC and became a division of the firm on July 22, 2016. Additional information regarding Risk Paradigm Group, LLC can be found on our website at www.rpgassetmanagement.com. RPg does not provide tax or legal advice. Please consult an independent tax advisor for additional guidance.
This material has been prepared solely for informational purposes and is not to be considered investment advice or a solicitation for investment. Performance provided is past performance. Past performance is not indicative of future results. Investments may increase or decrease in value and are subject to a risk of loss. As with any investment strategy, there is potential for profit as well as the possibility of loss. No representation or warranty is made that any returns indicated will be achieved. Investors should consult their financial advisor before investing.
Any projections, market outlooks, estimates or expectations of future financial or economic performance of the markets in general are forward-looking statements and are based upon certain assumptions and should not be construed as indicative of actual events that will occur. Actual results or events may differ materially from those projected, estimated, assumed or anticipated in any such forward-looking statements. Information contained herein is as of the period indicated and is subject to change. Any views expressed herein are those of the author(s) at the time of writing and are subject to change without notice.
The information contained herein includes information obtained from sources believed to be reliable, but we do not warrant or guarantee the timeliness or accuracy of the information as it has not been independently verified. It is made available on an “as is” basis without warranty.
This material is proprietary and may not be reproduced, transferred or distributed in any form without prior written permission from RPg. RPg reserves the right at any time, and without notice, to change, amend, or cease publication of the information contained herein. RPg may change any exposures and compositions reflected herein at any time and in any manner in response to market conditions or other factors without prior notice.
References to Indexes: The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the equity performance of larger companies in the U.S. Please note that an investor cannot invest directly into an index.
Risk Disclosures: Concentration, volatility, and other risk characteristics of a client’s account also may differ from the information shown herein. There is no guarantee that any client will achieve performance similar to, or better than, the strategy mentioned herein.
Sources: Bloomberg.
For more information, including risks of investing in our strategies, visit our website at www.rpgassetmanagement.com.