Stableford Capital Insights

Stableford Market Commentary: October 2020

Stableford Market Commentary October 2020
Stableford Capital— October Review

The S&P 500 closed down 2.8% in October (Figure 1), marking the second consecutive negative month. We haven’t seen this type of behavior since March. Election consternation and stimulus uncertainty ruled the day.We now have a better grasp on the election results, and more importantly the Senate makeup. The prospect of a divided government (GA runoffs notwithstanding) is among the better possible results from an equity market perspective as it reduces the likelihood of higher corporate taxes (the biggest weight on equities), and minimizes the potential for far-left (less corporate-friendly) cabinet appointees in a Biden administration. This, and the prospects of an effective vaccine from Pfizer, have lifted equities nearly 8% in the beginning of November.What now? There is a lot of good news “baked in” to the market now and valuations remain high for large-cap tech. The areas we have been focused on such as small-cap and value cyclicals have also begun to participate with the vaccine news (though “begun” might be an understatement—in 25 years I have never seen so many stocks move 20-30% in one day as they did November 9). We’d expect a slow grind higher as we move toward herd immunity through vaccinations. There will also be plenty of volatility due to concerns regarding shutdowns, vaccine efficacy and distribution, and runoff results. We will be looking for opportunities during those periods of concern as we balance potential returns with the risks of high valuations and uncertainty.[caption id="attachment_3286" align="aligncenter" width="940"]

Stableford market commentary october 2020 Figure 1

Figure 1: October -2.8% SPX Stableford Capital Market Commentary October 2020[/caption]

Fixed Income

Fixed income is starting to move after months of a narrow range, with rates moving up 19 basis points to 0.875% on the US 10 Year Bond in October (Figure 2). The move is driven by 2 factors: 1) anticipation of future economic growth and; 2) accelerated US fiscal spending driven by further stimulus. In anticipation of this move, we reduced fixed income holdings cut duration levels of what remains.[caption id="attachment_3287" align="aligncenter" width="940"]

Stableford market commentary october 2020 Figure 2

Figure 2: October -Rates Beginning to Move Up In October Stableford Capital Market Commentary 2020[/caption]As always, contact us with any questions.Be Well!Are you interested in making portfolio changes or getting a more in-depth analysis? Contact Stableford today by calling 480.493.2300 or simply request a copy of our Market Blast.SUBSCRIBE TO OUR COMPLIMENTARY STABLEFORD MARKET BLASTThis market commentary was written and produced by Stableford Capital, LLC. Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested in directly. The views stated in this letter are not necessarily the opinion of any other named entity and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.S&P 500 INDEX: The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

Justin Thomas
Justin C. Thomas has worked for over 15 years as a portfolio manager and analyst managing institutional assets for hedge funds and large financial institutions. Career highlights include 8 years as an equity analyst and portfolio manager at PartnerRe Asset Management, a global reinsurance company with $17 billion in assets under management, and prior to that managing a long-short equity portfolio for Citigroup’s proprietary account. Justin has also worked as an analyst at long-short hedge funds and in research for Montgomery Securities (Bank of America Securities). In addition, Justin Thomas gained operational experience while working in finance and operations at E-Stamp, a start-up in Silicon Valley. He began his career working as a CPA at KPMG. Justin has an MBA and Masters in Accounting from Northeastern University and an undergraduate degree in Economics from Tufts University.