We have reached the end of September and Summer has officially come and gone. Since the record highs set during the Summer months, markets have since pulled back. Even the strong sessions leading into the end of the month were not enough to save September and keep its five-month winning streak alive.
We started the month with positive momentum, celebrating record highs during August. The Nasdaq and S&P were making new records almost daily amid an accommodative Fed and optimism over a coronavirus vaccine. September, however, has lived up to its reputation as being part of the toughest period of the year for stocks. Even the red-hot technology sector fell from grace this month. The Nasdaq led the way down giving back 5.16%, while the S&P was off 3.92% and the Dow dipped 2.28%. It was the first monthly loss since March. We could point to any number of culprits including lack of a stimulus out of Washington, increases of coronavirus cases in pockets across the country, and rising political tensions. Even interest rates declined with both the 2 year and 10-year treasury slipping for the month.
Despite the rockiness of September, Wall Street put together its best back-to-back quarters since 2009, with the S&P 500 adding 8.5 percent and the Dow gaining 7.6 percent in the third quarter. The Nasdaq took the top spot, tacking on an additional 11 percent from July through September, for its best two consecutive quarters since the early 2000s. The market’s sharp turnaround has nonetheless been referred to as the most uneven recovery in modern U.S. history.
While overall, the nation has regained nearly half of the jobs lost during the pandemic, several key demographic groups have recovered more slowly, including mothers of school-age children, Black men, Black women, Hispanic men, Asian Americans, younger Americans (ages 25 to 34) and people without college degrees. New data from the Bureau of Economic Analysis released in September, showed the depth of the damage to the overall economy last quarter, estimating that the GDP dropped 31.4 percent.
The impact of the pandemic is now just starting to show up in many industries with their ability to keep their employees after six months of an idling economy. Disney announced it would lay off 28,000 people across its theme park division in the United States due to the toll the pandemic has taken on its core business. Royal Dutch Shell also announced up to 9,000 layoffs this week as it shifts away from fossil fuels. Depressed economic activity around the world have kept oil prices low, crippling the debt-strapped energy industry. The uncertainly was evident in the energy markets this month, with oil slipping again, sending the overall energy sector down 14.64%.
You don’t need to look further than the airline industry to see just how deep this crisis has cut. The International Air Transport Association is now expecting even fewer people to fly in 2020 than previous estimates as airlines and other travel related stocks continue to struggle. It is estimated that revenue for the industry will fall by as much as 80% year over year. Passenger volumes are not expected to return to pre-pandemic levels until 2022 at the earliest. This would all help to explain the announcement that American Airlines and United Airlines will lay off a combined 31,000 employees.
It was certainly not encouraging for investors to get news that coronavirus deaths surpassed 1 million worldwide as Europe is wrestling with the beginnings of a second wave. New York has ramped up testing, reaching record high daily rates and totaling over 11 million tested. According to Governor Cuomo, “This pandemic is not over. We continue to closely monitor the data throughout the state, push our testing capacity to new highs and keep an especially close eye on the ZIP codes in areas that have seen recent outbreaks.” As we hope to get back to “normal,” we are reminded that this virus has no bounds. From the football field all the way up to the White House, our view of the future remains very unsure.
This may help to explain the loss of momentum in the jobs number. Nonfarm payrolls rose by 661,000 in September, which was short of estimates that were expecting 800,000. Some encouraging data indicated that the largest gains were in leisure and hospitality, followed by retail and health care. While millions more remain unemployed, September’s gains mean that about 12 million jobs have been recovered since the mid-March economic shutdown that saw about 22 million layoffs.
The weeks ahead remain challenging for us personally and as a society. The public display of just how bad things have become, witnessed during the Presidential debate, epitomizes the fact that we have more than just economic problems to solve as a nation. We can only hope for improvement and they certainly set the bar very low!
Until next month, stay safe and be well!