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U.S. Equities Market Attributes October 2020

U.S. Equities Market Attributes November 2020

S&P Latin America Equity Indices Quantitative Analysis Q3 2020

U.S. Equities Market Attributes September 2020

U.S. Equities Market Attributes August 2020

U.S. Equities Market Attributes October 2020

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Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

U.S. Equities Market Attributes October 2020

MARKET SNAPSHOT

The fairy tale continued in October, as the S&P 500 reached 3.04%, reversing last month’s decline
(-3.92%), with all 11 sectors up, and getting back on the upward track of recovery from the low on March 23, 2020—that is until the week of Halloween, when the market’s treat turned to trick.  The initial cause of the lack of candy, also known as Phase Four, was that it was suddenly taken away, as Congress left town for the election, without passing a relief bill.  While some blamed the pre-election political fighting for the lack of passage, more saw the market’s belief that it would get its candy now as the issue.  As for the spark (I think Shakespeare said it best, “your houses”), the quick market turnaround produced broad declines for the S&P 500 (-5.64% for the week), leaving the spooky month of October in the red (-2.77%), as uncertainty around politics took over the Street.  Even earnings, which still dominated individual trades, were unable to reassure the market, as 85.2% of them beat their estimates (which were lowered by 29.9%); perhaps if one or two of them would have offered some forward guidance… then again, if they knew, they would tell.  Meanwhile, COVID-19 case count has been rising in the U.S. (along with the yardstick seven-day average) and has set daily new records.  Worse were the coming attractions from Europe, where reclosings, curfews, and country isolations were increasing, with expectations that these events would spread beyond the pond in time for Thanksgiving.  At this point, only Asia appeared to have maintained some control of the virus (actually New Zealand appeared to be the poster child of success), and even that was of concern.  The bottom line for October was a second month of declines, which left the S&P 500 up 1.12% YTD (down 3.43% from the pre-COVID Feb. 19, 2020, high and -8.68% from the closing high on Sept. 2, 2020), which given the economics was still good and showed a lot of optimism for the recovery.  As for November, my vote (and it appears that of almost everyone I talk to) is for significantly more volatility, as the election and its results play out, with the Street hoping that eventually it will reduce uncertainty and add clarity (for better or worse, or both), which will permit market participants to adjust and get on with their lives.  The S&P 500 closed at 3,269.96, down 2.77% (-2.66% with dividends) for the month, from last month’s close of 3,363.001, when it decreased 3.93% (-3.80% with dividends); the three-month return was -0.04% (0.37%), the YTD return was 1.21% (2.77%), and the one-year return was 7.65% (9.71%).  The Dow closed at 26,501.60, down 4.61% (-4.52% with dividends) from last month’s 27,781.70, when it was down 2.28% (-2.18% with dividends).  Over the three-month period, The Dow was down 0.04% (0.80%), the YTD period was down 7.14% (-5.38%), and the one-year return was -2.01% (0.34%). 

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U.S. Equities Market Attributes November 2020

KEY HIGHLIGHTS

U.S. Equities Market Attributes November 2020

MARKET SNAPSHOT

The lead 2020 story—COVID-19—continued to hold the spotlight up until the last week of the month, when “Spread versus Treatment” moved in as the featured story, and Merger Monday turned into Vaccine Monday (with three in a row).  This led to a new S&P 500 closing high (3,626.91 on Nov. 16, 2020), as the index closed above 3,600 for the first time, while the DJIA posted a new closing high on the same day (29,950.44).  The market focused on the cure and economic growth rate, as opposed to the short-term record virus cases and hospitalization rate, or the depressed economic data (with the exception of the surging housing market, helped by more buyers and a lack of sellers; the opposite of oil’s higher supply and lower demand problem).

Then the lead 2020 story went from COVID-19 vaccines to the Trump administration permitting the start of the presidential transition (although Trump continued to challenge the election results, and did not concede), and Biden started to announce his cabinet and advisors (with many requiring Senate approval).  The names on Biden’s list were familiar, with many being from the Obama presidency, when Biden was vice president, including the expectation of former Fed Chair Janet Yellen as Treasury Secretary.  The market’s reaction of a return to “the known” and “more traditional” (and therefore a more predictable course) was positive (along with the prospect of a mixed government, as the Senate was expected to remain in Republican hands after the Jan. 5, 2020, run-off election) and pushed the S&P 500 to new highs (Nov. 24, 2020, at 3,635.41 and on Nov. 27, 2020, at 3,638.25, its 25th and 26th new closing highs of the year), as The Dow® crossed and closed above 30,000 for the first time (30,046.24, it’s 9th new high of the year).  The S&P 500 ended the month with a broad 10.75% gain—its best November since 1928, when it was up 11.99%, which was followed by the worst November on record in 1929, with a 13.37% decline.  Year-to-date, the index was up 12.10%, though it was 0.46% off its Nov. 27, 2020, closing high, as it goes into what is traditionally its best month (up 72.8% of the time).


S&P Latin America Equity Indices Quantitative Analysis Q3 2020

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Michael Orzano

Senior Director, Global Equity Indices

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Silvia Kitchener

Director, Global Equity Indices, Latin America

S&P Latin America Equity Indices Commentary: Q3 2020

Overall, Latin American equities remained flat (-0.2%) in USD terms, as measured by the S&P Latin America BMI, a broad, regional index designed to measure the performance of 289 stocks from Brazil, Chile, Colombia, Mexico, and Peru. However, the S&P Latin America 40, representing the 40 largest (by market cap) and most liquid stocks, dropped a full 2.0% for the quarter amid the continued ravaging of COVID-19 on public health and the local economy.

On the economic front, S&P Global Ratings’ analysts recently reported that Latin America is in the middle of a recovery. However, the 2020 GDP forecast for all countries in the region will remain contracted. Due to strong exports to China and less stringent lockdowns, Brazil’s economic contraction will be less severe than was originally forecasted, while other countries like Argentina, Colombia, Mexico, and Peru will be worse off than expected. Meanwhile, Chile is very much on target. Many variables will affect the depth and speed of the recovery as countries try to emerge from the worst pandemic in more than 100 years.

At the sector level, Information Technology, Materials, and Industrials were the winners, with positive returns of 19.1%, 15.2%, and 8.3%, respectively for Q3 2020. The worst performers were Energy, Utilities, and Financials, losing 9.1%, 6.8%, and 6.4%, respectively.

Argentina’s economy is one of the most affected in the region, but economists expect Q3 2020 to be the start of its gradual stabilization. S&P Global Ratings has raised the country’s rating based on a new proposal to restructure its debt in order to avoid another sovereign default. The S&P MERVAL Index gained 7% in ARS for the quarter, with the S&P/BYMA General Construction Index leading the sector board (up 42.5%); the biggest losses came from the Energy sector(-8.9%).

Brazil’s equity market was nearly flat, with the Brazil 100 Index (IBrX 100) and the S&P Brazil BMI gaining 0.0% and 0.7%, respectively. This may be a first step in the right direction, with the economy rebounding during Q3, primarily driven by increased demand in commodity and food exports. Not surprisingly, the S&P/B3 Momentum Index (up 8.5%) and the S&P/B3 High Beta Index (up 5.9%) did well. These smart beta indices are designed to measure stock performance while factoring in the sensitivity of the market and its movements. Likewise, the S&P/B3 Ingenius Index (up 21.0%) continued to generate extraordinary returns in the midst of the pandemic, benefiting from the performance of technology-driven stocks.

Chile is not only struggling with the pandemic, but it is also in the middle of a major potential political change, with an upcoming referendum for a new constitution. All this uncertainty is keeping the equity market in the red, with the S&P IPSA dropping 8.1% in Q3. S&P Global Rating’s economists, however, have been more optimistic about a quick economic recovery in Chile, given the “strong government support for labor markets and business.” Chile’s shining spot was in the mining sector, with the S&P/CLX Natural Resources Index gaining 9.6% in Q3.

Colombia and Peru generated strong results. The S&P Colombia Select Index gained 7.3% for the quarter. Among Peruvian equity indices, the S&P/BVL Peru Select 20% Capped Index was the best performer (up 9.3% in PEN and 7.4% in USD) for Q3, aided by the high returns of the mining sector, as the S&P/BVL Mining Index had double digit returns (up 20.6% in PEN and 18.5% in USD).

Mexico’s main equity indices were generally flat, with the S&P/BMV IPC losing 0.7% for Q3. The exception was the S&P/BMV IRT MidCap, which gained 10.1% for the same period. Looking at the sector indices, the story of Chile and Peru repeats itself, with the mining sector in Mexico yielding the highest return, with the S&P/BMV Materials Select Sector Index gaining 17.3%. Among other industries, FIBRAs in Mexico had a strong third quarter, with returns of 5.9%. As was the case in Brazil with the S&P/B3 Ingenius Index, the S&P/BMV Ingenius Index gained 12.0% for the quarter and 56.6% YTD.

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U.S. Equities Market Attributes September 2020

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Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

MARKET SNAPSHOT

The champagne continued to be popped, as the month opened with two consecutive days of new closing highs (3,580.84; 22 YTD). However, what goes up, must come down, and what goes up too fast eventually brings smiles to short sellers and agita to the market.

Aiding the market’s decline was the growing concern over a pullback in openings (due to higher COVID rates), re-closings and restrictions (especially in Europe), and chaotic U.S. school openings, as many areas appeared to be ill prepared (even though it had been planned for months), as “kids will be kids” (especially on the higher education level) spread the virus. Starting to add to the market concern is the upcoming presidential election on Nov. 3, 2020. Typically, more trading positions (reallocations) would be taken by now, but the uncertainty of the outcome, which includes when we will know who won, has produced paper portfolios, but limited trading action. Even the first presidential debate (with two more planned for Oct. 15 and 22, 2020) and a fight over filling the vacant Supreme Court position failed to bring out significant confirmed trades. It’s expected that the impact will increase significantly in October (don’t even want to think about November yet), and the view of the outcome will drive trades.


U.S. Equities Market Attributes August 2020

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Howard Silverblatt

Senior Index Analyst, Product Management

KEY HIGHLIGHTS

MARKET SNAPSHOT

It wasn’t a perfect month, but with the S&P 500’s 7.01% gain, some may label it as such given it was the best August since 1986’s 7.12%. However, the last week of the month (up 3.64%) was a perfect week—five consecutive days of new closing highs (3,508.01; an event not seen since Oct. 16-20, 2017, and March 16-20, 1998, before that), and a new intraday high (3,514.77, set on the last day of the month). On the way to these highs, the index passed (and closed above) the 3,400 and 3,500 levels for the first time. Year-to-date, it posted 20 new closing highs, and it has posted 144 since the U.S. November 2016 election, with 64 days left until the next election date. The impressive run up since the March 23, 2020, low (56.45%, 176% annualized) has astonished professional money managers, as they seek to justify the optimism that has the index selling at a 21.3 P/E based on 2021 earnings (a value that would be considered high, if it were based on the current 12-month earnings, much less discounted 16 months into the future). What gives with the current version of “irrational exuberance” is the market’s optimism over COVID-19, that it will be tamed, if not cured (treatment if not a cure, easy and inexpensive testing, and moving it out of the death column and into a bad two weeks penalty box). I should note that when the Maestro used that term on Dec. 5, 1996, the index was up 21.0% YTD and selling at a trailing 12-month P/E of 18, compared with 28 today; of course, the index did go up another 105% until the March 24, 2000, high (from 745 to 1,527).


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