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9.28.20
Market analysis

Economic recovery continues. However, we remain alert to slowing momentum in the U.S. labor market, which threatens the health of the recovery.

Daily market analysis

September 29 | 4:30 p.m. CT

Market update:

The S&P 500 declined 0.48% to close at 3,335.47 on Tuesday. The U.S. labor market recovery is stalling. Jobless claims rose slightly last week while filings for the federal Pandemic Unemployment Assistance moved lower. Claims have averaged 878,000 over the past four weeks, more than double the average since 1967 of 369,000 and well above the peak of 665,000 in 2009. The risk is that a growing share of the jobless are now permanently unemployed and the expiration of jobless benefits may hurt incomes and consumer spending.

Our take:

We recommend normal strategic allocations across stocks, bonds and real estate. We also emphasize a preference for U.S. over international equities. Technology and Healthcare are among our preferred longer-term sectors. Diversified portfolios should maintain bond exposure near long-term strategic targets with a tilt toward higher-quality credits. Investment-grade corporate and municipal bond yields compared to Treasuries remain elevated and appear attractive.

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U.S. Bank in the news

9.22 | Reuters | Article

TREASURIES-Yields move off session low as stocks stabilize

“Overall, we are seeing fixed income markets exude a great deal of calmness and a calm approach in contrast to what we are seeing in equities,” said Bill Merz, head of fixed income research at U.S. Bank Wealth Management in Minneapolis.

Instant View: FOMC-Rates staying near zero until inflation lodges over 2%

The change in guidance is part of the Fed’s monetary policy shift announced last month that is aimed to offset years of weak inflation and allow the economy to keep adding jobs for as long as possible.

How long will low rates continue?

“It’s very likely the statement will reflect language out of the new strategy document,” said Bill Merz, senior portfolio strategist and head of fixed income research at U.S. Bank Wealth Management.

Investment Outlook
Third Quarter 2020

Markets are rebounding, thanks to significant policy support initiated to combat the global recession caused by COVID-19 pandemic shutdowns. The coming quarters are critical to evaluate how companies, countries and regions are emerging from these recent challenges. Strong market performance in the second quarter implies investors anticipate some progress, while continued central bank support of low borrowing costs should support ongoing recovery.

Thoughts from our Chief Investment Officer

“These are difficult times, but throughout this period we have found that clients who are grounded in a financial plan – tailored to their unique circumstances – can withstand market volatility within a constant news cycle.”

- Eric Freedman, Chief Investment Officer, U.S. Bank Wealth Management

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9.28.20
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