With lawmakers unable to agree on another stimulus package, more attention is being paid to what the Fed does. This week, on Tuesday and Wednesday, the Fed is meeting for the final time before November’s election. Something that we are watching carefully is what the Fed’s new economic interest rate projections will be, which, we hope will run through 2023. Also, more details of the strategy to let inflation run higher and help the economy. While we do not expect any specific actions by the Fed, we know from past experiences that what they say can move the market and possibly make up for any actions made by Congress. Survey results were released last week by Goldman Sachs that said 90% of the 860 small business owners surveyed have exhausted their funding from the Paycheck Protection Program and they are expecting that they will have to layoff off workers in the upcoming months. We are already seeing some of the effectiveness of the government spending wearing off as bankruptcies have started to increase as well. In addition to the Fed meeting, something else that is going to be very important is that the markets could be impacted by some of the economic reports coming out. On Tuesday, the Industrial Production report comes out, and then on Wednesday, the Retail Sales report will come out. Remember that 68% of our economy is made up of consumer spending. We will get a good gauge on the consumer when we see the report for retail sales. With this month already having some market volatility, we are hoping to see some good news from the Fed, and these reports coming out as we approach the election. Chances are slim that Congress is going to agree on any additional stimulus prior to the election, although it could possibly happen. A lot of things that the Fed has done to help the economy have already played out. We are now starting to get into some interesting scenarios, so we are watching to see how things evolve this week.
Behind the Scenes
There are sectors of the market that thrive in this kind of environment and there are sectors that do not thrive in this kind of environment. As we talk about deflation and other possibilities and things going on in the economy, we’re not advocating or saying that we’re going to see any big major dips in the market. We may see more volatility, but the reality of it is, we’re still in a territory where there’s been some very positive, surprising news. From a technical analysis side, we like to analyze the numbers that are behind all these things. The S&P closed at 3,340 this past Friday. We’re seeing a lot of volatility so far this month. We now have a new resistance level of 3,390. We could see a more bullish market if it breaks that point and holds there or higher. We are looking at support levels all the way down to 3,200. If we drop through to that level, we might see the bears come out. The reason we keep up with this and report it every week is because of the different sectors and to keep an eye on which ones that could experience disruption before the election. We want to see which one of these sectors is going to be sensitive to the talks surrounding the election, the Fed, and the possibility of additional stimulus programs.
There are a lot of small to medium-sized companies across the United States that are getting paid faster by the larger companies that they supply. The science of it was that a lot of large manufacturers will usually delay their payments to companies and one thing you really have to watch is the supply chain in a pandemic. Well, a lot of the way that large manufacturers are trying to make sure that the integrity of their own supply chain stays in place is that they’ve sped up the payment to companies to ensure that integrity stays positive. For a lot of these companies that are small to medium-sized suppliers, it’s been a lifeline and something that’s going on all across the country. You’re going to see more of that going forward which is really good and will keep more people employed in these companies that normally would have a harder time with cash flow because they have to wait longer to get paid.
Innovation is Key
Innovation makes a difference and people are finding ways to be innovative now more than ever. Along with the discussion of deflation, things behind the scenes in the economy, and ways to navigate the market, it all ties into our whole philosophy of financial planning being related to portfolio strategies in order to do worst-case planning. With the way we plan, you know if you can get through current situations and have the knowledge to confront the fears. We like to keep you aware and share what we feel like is the real news you need to be focused on. We do that through our social media, weekly vlogs, podcasts, and a wide range of other ways. We think deflation is going to be a topic along with interest rates and if there is a chance they could go lower. They can and after learning from Europe, we know they can go below zero for negative rates. Over the next few months, we are going to see some additional innovation and changes that will give us insight as we go towards 2021.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
The opinions voiced in this material are for general information only and are 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 into directly.
Economic forecasts set forth in this presentation may not develop as predicted.
No strategy can ensure success or protect against a loss.
Stock investing involves risk including potential loss of principal.
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