October 16, 2020

Market Movers
Modest movement. The S&P 500 Index had a wide range of news this week to consider, including paused vaccine trials
and the likelihood of no additional fiscal stimulus prior to the election. However, the index still managed to finish up 19
basis points (bps) at 3483. Systematic buying and retail demand for short-dated call options benefited the heavily
weighted technology index, the Nasdaq 100, which rallied by more than 1%

Feeling like a fall break. Volatility jumped this week, with the VIX rising by as much as 16% to 29 before settling at 27.41.
Low volumes exacerbated the move as an average of 8.5 billion shares traded per day, 22% lower than the 10.9 billion
year-to-date (YTD) average

Shrinking supplies. Oil recovered after spending most of the week in negative territory, as shrinking American crude and
refined product stockpiles offset signs that the fragile demand recovery is under threat. Adding to the global supply
picture, Libyan oil production is said to have reached 500,000 barrels (bbl) a day. WTI crude closed up less than 1%
near $40.80/bbl

Wave after wave. The yield on the German 10-year Bund hit a 7-month low, falling by 9 bps to settle at -0.62% on the
week. This occurred as Germany’s October Zew Survey was weaker than expected, and as Europe faces another wave of
COVID-19 cases

Macro
A rapid resurgence. COVID-19 cases are on the rise again in Europe. France and the United Kingdom have already
mandated tighter restrictions, including a curfew for Paris and the banning of indoor household gatherings in London.
Cases in the U.S. are hitting their highest level since mid-August

Eyes on the data. While initial jobless claims came in higher than expected last week at 898,000 (vs. consensus of
825,000), the highest reading since late August, retail sales suggested an improvement in consumer spending. Retail
sales rose for the fifth month in a row, increasing by 1.9% in September – surpassing August’s increase of 0.6% and
expectations for 0.8%

Prime time battle. Following the cancellation of the second presidential debate, which was originally set for October 15,
both President Trump and former Vice President Joe Biden hosted two separate town halls Thursday evening. The

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candidates’ events overlapped on prime time television, with President Trump on NBC and former Vice President Joe
Biden on ABC

Early bird gets the worm. With less three weeks until the U.S. elections, early voters are racing to the polls. It has been
reported that about 20 million Americans have already cast their votes, either in person or via mail-in ballots. For context,
more than 135 million total ballots were cast for the 2016 elections

Stimulus standoff. Treasury Secretary Steven Mnuchin and House Speaker Nancy Pelosi continue to negotiate a long-
awaited stimulus agreement. The president has indicated he is willing to go beyond the $1.8 trillion offer, however, Senate
Majority Leader Mitch McConnell has stated GOP lawmakers will not agree. Both sides have expressed urgency in
providing a second round of stimulus, although it’s unclear if a deal can be reached ahead of the election

Should I stay or should I go. Talks between the United Kingdom and the European Union (EU) over their future
relationship are hitting some turbulence, after British Prime Minister Boris Johnson said that the EU was refusing to
“negotiate seriously.” October 15 had previously been the Prime Minister’s deadline for determining if there was a clear
path to a deal

Micro
Still on staycation. Pandemic exposed stocks – largely companies within the leisure travel industries – underperformed
the broader market, falling more than 2% amid a continued spike in COVID-19 case counts abroad, and as friction
remains in U.S. stimulus talks. Stay-at-home stocks rose more than 1% as COVID-19 vaccine and antibody treatment trials
were paused following unexplained illnesses and identified health differences with groups that were treated (vs. those
who received a placebo), respectively

Banks feeling blue. Banks sold off more than 2%, despite earnings beats across the Street. Although numerous reports
exceeded consensus expectations, Banks continue to trade in tandem with the broader rate and vaccine narratives. The
10-year Treasury yield fell 2 bps during a shortened trading week for bonds, as markets continued to digest risks to the
macro backdrop

Shop from home. Consumer discretionary stocks had a strong start to the week, as numerous retailers flexed their e-
commerce muscles via multi-day online shopping events. This coincides with an early start to the holiday shopping
season, as retailers work to make up sales lost in their brick-and-mortar locations due to the pandemic. A risk-off tone
into the weekend brought these stocks into negative territory – finishing the week down less than 1%

Retail resilience. The Retail community now owns about 34% of the $55 trillion U.S. equity market. This compares to
1999, when households owned 40% of the U.S. equity market. If we were to retest the 1999 euphoric levels, an increase
of 6% in current household ownership would imply another $3.3 trillion of equity market cap to go. While we witnessed
muted performance for retail favorites this week, which closed down about 1%, these stocks are up almost 50% YTD

Week Ahead
Earnings season in full swing: 18% of S&P 500 Index constituents are scheduled to report next week

Top of mind: The final presidential debate is currently scheduled for October 22. The Senate Judiciary Committee is
expected to vote on Amy Coney Barrett’s confirmation to the Supreme Court on October 22

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 Major economic events in the U.S. include: Initial Jobless Claims, MBA Mortgage Applications, Markit US
Manufacturing PMI, Housing Starts, Existing Home Sales, Leading Index

Major economic events around the world include: France Markit Manufacturing PMI, UK CPI and Markit
Manufacturing PMI, Canada CPI, UK CPI and PPI Output NSA, Russia Key Rate and Unemployment Rate, Japan Jibun
Bank Manufacturing PMI and National CPI, Germany Markit/BME Manufacturing PMI, Eurozone Markit Manufacturing
PMI, Brazil IBGE Inflation IPCA-15

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Research. This material is intended for educational / informational purposes only.

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