This Weekly Market Update reviews the top three market headlines; Stocks Overlook Political Uncertainty, Jobs Expansion Streak Hits Six Months, ISM Indices Reflect Continued Expansion

Data Points

  • The S&P 500 index gained 7.3% on the week, leaving it up 10.2% YTD
  • Nonfarm payrolls grew by 638,000 in October while the unemployment rate fell to 6.9%
  • The ISM Manufacturing Index rose to 59.3 in October, its highest reading since September of 2018

Top Three Market Headlines

Stocks Overlook Political Uncertainty: Stocks enjoyed a scorching rally last week, shaking off the delayed resolution of the U.S. presidential election and many congressional races. Posting its best week since April, the S&P 500 index gained 7.3%, a resounding reversal of its 6% swoon over the last three weeks of October. Market observers offered a range of possible explanations for the surge, such as investors unwinding defensive pre-election positions, the prospect of a split government, improving economic data (see below), and declining Treasury bond yields. While investors will closely monitor unfolding political developments in coming days and weeks and assess their impact on the economy, the rally served as a reminder that the political backdrop is just one of multiple factors that influence investors’ actions.

Jobs Expansion Streak Hits Six Months: The Labor Department last week reported that U.S. nonfarm payrolls grew by 638,000 in October, the sixth straight month of gains. Growth was even better than indicated by the headline number, as the report included a 147,000 decline in temporary Census workers on the month. October’s growth brings the number of jobs regained since the economy started recovering from Covid-19-induced economic shutdowns to 12.1 million, more than half of the 22 million jobs lost in March and April. Meanwhile, the unemployment rate fell to 6.9%, down a full percentage point from September.

ISM Indices Reflect Continued Expansion: The U.S. economy continued its recovery over the month of October, according to surveys from the Institute of Supply Management (ISM). The ISM reported that its Manufacturing Index, which is based on surveys of manufacturing company executives, rose to 59.3 in October from 55.4 in the prior month. (A reading above 50 indicates expansion of activity while a sub-50 mark reflects contraction.) This marked the sixth consecutive month of expansion for the Manufacturing sector and was also the highest reading since September of 2018. Meanwhile, the ISM Services Index registered 56.6 in October, marking the fifth straight month of expansion, albeit at a modestly slower pace than in September, when the reading hit 57.8.

 
As of November 6, 2020
 Week Quarter-To-Date Year-To-Date One-Year
MSCI All Country World 7.60% 4.98% 6.42% 11.29%
S&P 500 7.36% 4.50% 10.33% 16.26%
Russell 2000 6.89% 9.13% -0.35% 4.91%
MSCI EAFE 8.11% 3.79% -3.57% -0.53%
MSCI Emerging Markets 6.62% 8.82% 7.55% 12.51%
FTSE NAREIT 4.06% 1.35% -16.43% -16.47%
Bloomberg Commodity 1.36% 2.79% -9.63% -8.59%
Barclays U.S. Aggregate 0.49% 0.04% 6.83% 7.24%

WSJ 11/6/2020, Capital Economics 11/6/2020; Data from Morningstar Direct. Returns for periods greater than one year are annualized. Investment advisory, named and independent fiduciary services are offered through Gallagher Fiduciary Advisors, LLC, an SEC Registered Investment Adviser. Gallagher Fiduciary Advisors, LLC does not express an investment opinion regarding any specific commodity, sector or individual security. Unless otherwise expressly noted, the contents of this communication do not constitute securities or investment advice, nor should this communication be construed as an opinion regarding the appropriateness of any investment. Gallagher Fiduciary Advisors, LLC is a single-member, limited-liability company, with Gallagher Benefit Services, Inc. as its single member. Neither Arthur J. Gallagher & Co., Gallagher Fiduciary Advisors, LLC nor their affiliates provide accounting, legal or tax advice. The information provided cannot take into account all the various factors that may affect your particular situation, therefore you should consult your Gallagher Fiduciary Advisors consultant before acting upon any information or recommendation contained herein to discuss the suitability of the information/recommendation for your specific situation.