September Market Commentary

Major asset classes declined in September, with the exception of some fixed income, as investor optimism moderated slightly.

The S&P 500 dropped nearly 4% in the month but is still up over 4% year-to-date and more than 50% since late March. Volatility returned in September, with 12 days where the S&P 500 moved more than 1%, of which six were positive and six were negative. Investors seem to agree that the markets are richly valued.

Fixed income yields decreased, with 10-year Treasury yields down 2 basis points. The Fed vowed earlier in the month to keep their interest rate target between 0.00%-0.25% until the economy reaches full employment and inflation is on track to reach and exceed their 2% goal.

Gold declined over 4% in the month but is still up just over 24% year-to-date. Slower inflows into gold ETFs likely caused the decline. The US dollar increased nearly 2% in September as investor worries spurred a flight to safety.


Oil dropped 9% in the month and is down 36% year-to-date, despite steady demand and a decline in domestic oil inventories to their lowest level since April. Concerns about the ongoing pandemic have dimmed hopes of a recovery in oil demand to more normal levels and refiners are struggling under a glut of jet fuel due to lack of airline demand.

Investors took their foot off the gas in September as the overwhelming bullishness we’ve been witnessing in markets showed signs of wavering in the face of the unrelenting pandemic and the lack of a new federal stimulus package. Let’s take stock of the latest developments.

As Goes COVID, So Goes the Economy


Economic data such as GDP, unemployment and other indicators have improved. The key point to remember is that they’ve improved compared to the Spring; however, if we were comparing current conditions to those pre-COVID, they look poor.

Lower wage workers have been disproportionately affected by layoffs while white collar workers have been relatively unscathed. In August, unemployment in the leisure and hospitality industry stood at 21.3% while it was 7.2% for professional and business service workers - which is why average hourly earnings have actually managed to rise 4.5% over the past few months – removing the lower wage workers has increased the average! However, the relative calm that white collar workers have experienced may be coming to end as the next wave of layoffs is headed toward corporate America. In recent days, a number of major corporations have announced significant layoffs:

  • Disney has laid off 28,000 workers

  • Dow said it would cut more than 2,000 jobs

  • Royal Dutch Shell said it would lay off up to 9,000 people (10% of their workforce)

  • Raytheon Technologies announced cuts of 15,000 jobs

  • Allstate is cutting 3,800 jobs

  • Goldman Sachs is cutting 400 workers


The major airlines have also run out breathing room in the absence of a new stimulus package. American Airlines has announced plans to furlough 19,000 workers and United has announced plans to cut 13,000. This is on top of the 150,00 employees who have already left voluntarily or took unpaid leave at the big four airlines. For example, Delta has avoided layoffs but only after 17,000 employees left voluntarily and 40,000 took unpaid leave.

There’s also been little progress on passing a new stimulus bill. The House passed their version of the stimulus bill on October 1 but there’s little chance it will be passed by the Senate. Negotiations continue but it is increasingly unlikely that a new stimulus bill will be passed before the election.

As a result, Wall Street economists have been lowering their economic growth forecasts for the fourth quarter:

  • Goldman Sachs: 3.0% growth, down from 6%

  • Morgan Stanley: 3.5% growth, down from 9.3%

  • JP Morgan: 2.5% growth, down from 3.5%

  • Bank of America: 3% growth, down from 5% 


On a Brighter Note…


The housing market is booming. New, pending and existing home sales all shot up during the summer. Mortgage applications are up significantly from last year. And in mid-September, the National Association of Home Builders reading on homebuilder sentiment showed homebuilders had never been as bullish about the future as they are today. Current sentiment is even higher than during the housing expansion of the 2000’s that paved the way for the financial crisis of 2008.


The cause appears to be a move to relocate to the suburbs given the switch to working-from-home due to the pandemic. In addition, there is limited supply. Add in historically low mortgage rates, which the Fed has signaled are unlikely to rise for the foreseeable future, and the housing market is on fire.