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September 2020 Economic Dashboard

As September came to a close, we are now 6 months from the bear market bottom of March 23rd. The market looks vastly different today than it did one year ago, but the S&P 500 is up 8.2% for the 1-year period ending on September 23rd. This compares favorably to the average returns over the prior 5 and 20 calendar years of 10.17% and 5.6% respectively.

While this recovery has included many of the well noted large technology firms, the quick and extreme reordering of the current US economy has also created several examples of related industries that have experienced vastly different outcomes over the past year.

-The stocks of Home Improvement Retailers fueled by the many projects quarantined homeowners have decided to tackle are up 43% while Department Stores retailers are down 58% as the lockdowns have only accelerated shoppers’ move towards online and social distanced shopping.

-Home Builders fueled by low interest rates and a Monthly Supply of Houses at its lowest level on record have risen 24% while Residential REITs which develop and operate many types of housing units, particularly multi-family properties, are down 21%.

-With traveler volume as measured by the TSA on September 23rd still less than 28% of what it was a year ago, Airline stocks are down 45%. The Air Freight and Logistics companies using their vast fleet of planes and trucks to handle the surge in online shopping have improved 25%.

-Insurance Brokerage firms benefitting from strong pricing environment have risen 18% while Property & Casualty Insurers are down 22% – weighed by the uncertainty of possible COVID related losses.

With Congress working towards an additional round of stimulus, the Federal Reserve armed with an additional $380 billion in aid, and personal savings rates remaining at all-time highs, we believe that there is ample opportunity for the economic recovery to expand in breadth to include many of these lagging industries and therefore those stocks as well.

The true catalyst for the start of a full recovery remains a COVID-19 vaccine. Four trials are currently in Phase 3 as part of the US government’s Operation Warp Speed, along with several others around the world, giving us reason for optimism.

Thank you for your continued trust and confidence in our firm.

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