October 19th, 2020

A Note From Your Investment Team…

We empathize with concerns about a hotly contested election result. However, we think it’s important to differentiate the political impact of election uncertainty from the market impact. In most cases, despite the possibility of some market disruption, we believe the stock market will be forward-looking and see past the period of uncertainty. While there is a fair chance that the election result may be delayed slightly, we expect the strength of our political institutions to prevail, for the election outcome to be determined fairly, and for a timely transition of power. Even if the process is bumpier than expected, market risks will likely be tempered unless there’s a political breakdown that threatens lasting damage to the economy or corporate America, and we’re a long way from there.

THE WEEK ON WALL STREET

Stocks treaded water last week amid fading prospects for a stimulus bill, fears of a second wave of COVID-19 cases, and increasing political and regulatory pressures on Big Tech companies.

The Dow Jones Industrial Average added just 0.07% while the Standard & Poor’s 500 eked out a gain of 0.19%. The Nasdaq Composite index picked up 0.79% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slid 2.08%.1,2,3

Rocky Week

The stock market began the week by posting strong gains on hopes of a fiscal stimulus bill. Also, investors were optimistic that earnings season would reflect an improving picture of corporate performance.

But stocks stumbled midweek on a mixed bag of early earnings results, and an increase in COVID-19 cases in the U.S. and Europe. Disappointing news on some key COVID-19 treatment trials also weighed on the market, as did a jump in new jobless claims and a continued stalemate on a fiscal stimulus package.

Stocks attempted to rally on Friday, emboldened by strong retail sales, but lost momentum as trading came to a close. 

Earnings Season Kicks Off

Earnings season began on an upbeat note as major banks mostly beat revenue and profit expectations. Banks attributed the strength to rising consumer deposits, a drop in the amount of money set aside for failing loans, and strong results from their investment banking and trading units.4

Airlines fared less well. Investors were disappointed with the quarterly reports even though the average daily cash burn at these companies generally improved. Airline management uniformly accompanied their earnings announcements with warnings of continued near-term weakness due to COVID-19.5

Tip of the Week

Consider setting up ground rules before you take someone into your home. It may be uncomfortable, but no one wants to argue over misunderstandings.

THE WEEK AHEAD: KEY ECONOMIC DATA

Tuesday: Housing Starts.

Thursday: Jobless Claims. Existing Home Sales. Index of Leading Economic Indicators.

Source: Econoday, October 16, 2020

The Econoday economic calendar lists upcoming U.S. economic data releases (including key economic indicators), Federal Reserve policy meetings, and speaking engagements of Federal Reserve officials. The content is developed from sources believed to be providing accurate information. The forecasts or forward-looking statements are based on assumptions and may not materialize. The forecasts also are subject to revision.

THE WEEK AHEAD: COMPANIES REPORTING EARNINGS

Monday: Halliburton (HAL), PPG Industries (PPG), International Business Machines (IBM).

Tuesday: Netflix (NFLX), Lockheed Martin (LMT), Procter & Gamble (PG), Snap (SNAP), Texas Instruments (TXN).

Wednesday: Verizon (VZ), Abbott Laboratories (ABT), CSX Corp. (CSX), Chipotle Mexican Grill (CMG).

Thursday: AT&T (T), Intel Corp. (INTC), Coca Cola Co. (KO), American Airlines (AAL), Southwest Airlines (LUV).

Friday: American Express (AXP).

Source: Zacks, October 16, 2020

Companies mentioned are for informational purposes only. It should not be considered a solicitation for the purchase or sale of the securities. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change. When sold, investments may be worth more or less than their original cost. Companies may reschedule when they report earnings without notice.

Quote of the Week

“A person will be just about as happy as they make up their minds to be.”

ABRAHAM LINCOLN

Riddle of the Week

What should the last entry be in the following sequence of numbers: 9|18, 8|46, 7|94, 6|63, 5|52, 4|__?

LAST WEEK’S RIDDLE: Al gives Jane three boxes, one labeled DIAMONDS, one labeled PEARLS and one labeled DIAMONDS OR PEARLS. He tells her that all three boxes are labeled incorrectly, and that one box contains diamonds, one pearls and the other emeralds. Al then tells Jane that if she can guess the contents of any box without opening it, she can keep the contents. How many boxes must Jane open to do this, and/or how many boxes can she keep?

ANSWER: Jane keeps everything and does not need to open a single box. Since each box is labeled incorrectly, the box labeled “Diamonds or Pearls” must contain emeralds. Therefore, the box labeled “Pearls” must contain diamonds, and the box labeled “Diamonds” must contain pearls.

Valley Oak Wealth Management can be reached at 415.898.4439 info@valleyoakwm.com or ValleyOakWM.com

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Tim Russell is a Wealth Advisor with, and securities offered through, LPL Financial member FINRA/SIPC

This material does not necessarily represent the views of the presenting party, nor their affiliates. The information herein has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.  Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. MarketingPro, Inc. is not affiliated with any person or firm that may be providing this information to you. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.

CITATIONS:

1. The Wall Street Journal, October 16, 2020

2. The Wall Street Journal, October 16, 2020

3. The Wall Street Journal, October 16, 2020

4. CNBC.com, October 13, 2020

5. CNBC.com, October 14, 2020