Fundamentum - Weekly Snapshot: Week Ending 9/11/20

Fundamentum - Weekly Snapshot: Week Ending 9/11/20

September 14, 2020

Market Review: Week Ending 9/11/2020

FANG stocks dropped 4% or more last week and the Nasdaq Composite reached correction territory on Tuesday (down 10% from its recent high) as the broader S&P 500 Index fell for the second consecutive week, down 2.5% closing at 3340.1 It led to this week’s Barron’s cover - ‘Not Ready to Pop...The Tech Bubble could keep growing, despite recent setbacks for the stocks”. While the correction in the Tech-oriented Nasdaq has been most apparent, the Composite is still up 21% for the year and has rallied 58% from its March low.1 Safe-haven government bonds caught a bid for the second consecutive week, driving yields on the 10-year Treasury Bond down to 0.67%.1 No clear catalyst has been identified for the two-week slide. One possibility is the Senate Republicans “skinny” COVID-19 aid package that was blocked by Democrats and never reached a vote, lowering the likelihood of another stimulus package being enacted before the November elections. Another is that the pace of recovery appears to be slowing, highlighted by weekly jobless claims figures that have been flat for two consecutive weeks, leaving continuing claims at a staggering 13m level.1 Finally, evidence of speculative excess from retail investors and in the options market during the summer market surge where a record 18.4m single-stock option contracts occurred in August (up 80% from July levels1) could simply be wearing off, a healthy and necessary occurrence if the rally is to continue through the end of the year. Options markets may require more time (and market declines) to shake off the excess, as additional records were set in September (23.8m single-stock daily contracts a day1) around the time of the Tesla and Apple stock splits. More than evidence tied to the real economy or earnings expectations, we tend to believe the pullback so far is a blowoff of some speculative activity. Through the close Friday, year to date results for the major indices are as follows: S&P 500 4.8%, Russell 2000 -9.4%, MSCI EAFE –5.2% and Bloomberg Barclays Aggregate Bond 7.0%.2

Want to know what we're watching in the week ahead? Check out the FULL REPORT in attachment section below.

Chad Roope, CFA®
Paul Danes, CFA®


1-Morningstar Direct 9/14/20
2-Factset 9/14/20