Market Commentary 09/04/20

An Oxford Harriman & Company Commentary

U.S. Market March Higher to Close August

Federal Reserve stimulus measures and low interest rates continued to provide investors the confidence to push the U.S. market higher as we entered August.  We believe investor sentiment also improved due to coronavirus trends and better-than-forecasted Q2 2020 earnings.  A combination of easy money policies, low interest rates, and a fear of missing out made equities attractive despite valuation concerns.

Large cap growth stocks, which tend to be more technology focused, remained a beneficiary of the Federal Reserve’s current monetary policy. The technology, consumer discretionary, and communication services trio continued to push the broad market index higher throughout August.

Additionally, the risk-on sentiment carried over to the credit markets. With interest rates near historical lows and recent dividend cuts, savers are in a difficult position when it comes to generating income. August’s credit market activity suggest investors are willing to take on lower credit quality exposure to earn a higher yield.

New Coronavirus Case Count Trends Lower in the U.S.

The U.S. appears to be successfully re-flattening the curve after the June and July resurgence. In our opinion, flattening the curve and slowing the growth rate are both important to improve consumer sentiment and return to economic growth. Consumer spending accounts for nearly 70% of U.S. economic activity.1 We feel U.S. consumers are more likely to resume spending if coronavirus cases slow and the economic outlook improves. The U.S. economic recovery is dependent on consumers to return to the stores and to once again starting to travel.

U.S.-China Relations Remain Something to Watch

The U.S. and China continue to battle for global supremacy, and relations deteriorated further in August. The U.S. ordered China’s Houston consulate closed the last week of July, and China responded by ordering the U.S.’s Chengdu consulate closed. Health and Human Services Secretary Alex Azar traveled to Taiwan during August, which further inflamed tensions. We believe China views Taiwan as a territory, and Secretary Azar is the highest-ranking U.S. cabinet official to visit Taiwan since the U.S. broke diplomatic ties in 1979.  stretch into 2021. Each of these risks could potentially derail the stock market’s ongoing rally.

As the stock market enters September, we feel investors should not overlook the investment risks.

Warm Regards,

Dennis P. Barba, Jr.

President & Managing Partner


The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.



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