Weekly Market Review: November 2, 2020

Weekly Market Review: November 2, 2020

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Investors are likely used to “stocks beating bonds,” but the reverse does happen more often than you think. In the last four decades (1980-2019), the total return of taxable bonds (using the Bloomberg Barclays Aggregate Bond Index as the benchmark) have outperformed the total return of stocks (using the S&P 500 as the benchmark) in 11 of the 40 years, most recently in 2018. With just two months to go in calendar year 2020, bonds (up +6.3% YTD) are again beating stocks (up +2.8% YTD) (source: BTN Research).

The size of the U.S. economy increased a record +33.1% in the third quarter 2020, i.e., quarter-over-quarter change expressed as an annualized result. In reality, the U.S. economy as of 9/30/20 is only +7.41% larger than the size of the U.S. economy as of 6/30/20 after removing the impact of inflation. The government elects to take the actual quarterly change, i.e., the +7.41% increase, and report it as if it had already repeated itself for four consecutive quarters. That’s how a +7.41% increase turns into a +33.1% gain (source: Department of Commerce).

As of Sunday 11/01/20, a reported 92 million Americans had already voted in the 2020 presidential election. Both major parties are banking on record turnouts. In the last 100 years (1920-2020), the highest turnout recorded for a presidential election was in 1960 when 62.8% of our “voting age population” went to the polls and elected 43-year old John F. Kennedy. The turnout in 2016 was just 54.8% of our “voting age population” (source: The American Presidency Project).

Notable Numbers for the Week:

  1. BAD, BUT NOT THAT BAD – The 3/27/20 CARES Act included $139 billion of relief for the 50 U.S. states. From 2/29/20 to 8/31/20, the tax revenue collected by all U.S. states is down $30 billion over the same 6-month period from a year earlier. When the CARES Act was being debated in Congress, U.S. Governors requested financial support of $500 billion from lawmakers (source: National Governors Association).
  2. PURE MICHIGAN – The $18 billion of municipal bonds that the city of Detroit defaulted on in 2013 is the largest municipal bond default in U.S. history (source: Federal Reserve Bank of St. Louis).
  3. THE ONLY GAME THEY PLAY – The breakeven price of oil for Saudi Arabia in 2020 is $78 a barrel. 80% of the total government revenues in Saudi Arabia come from the sale of oil. The price of oil closed at $35.79 a barrel (West Texas Intermediate) on Friday 10/30/20 (source: Statista).

Mark R. Reimet, CFP®
CERTIFIED FINANCIAL PLANNER™

Jodie Booth
Financial Advisor