September Market Overview

Business person working at desk looking at charts

Global equity markets reversed course and were broadly lower in September as investors grew more cautious of the U.S.’s continued struggles to contain the pandemic, as well as lawmakers’ failure to come to an agreement on additional stimulus support.  Both of these dynamics present risks that could damage the fragile economic recovery.

One notable aspect of the September decline was the underperformance of many of the large cap Technology stocks, most easily illustrated by the 5.7% decline of the Nasdaq 100 ­– though many of the largest companies declined even more.

More broadly, large cap growth stocks were down 4.7% (as measured by the Russell 1000 Growth Index), lagging large cap value stocks, which declined just 2.5% (as measured by the Russell 1000 Value Index).  While we are encouraged by the outperformance of value stocks in September, growth stocks continued to lead their counterparts by a remarkable 35.9% through the end of September – a fact which a recent Bloomberg News article called “one of the widest divergences ever.”1  We believe this level of outperformance is unsustainable.

Though equity markets declined for the month, we believe it is important to put this news into context.  The global economy has suffered an unprecedented blow this year, and yet, many domestic stock indices remain in positive territory for the year.  As we have mentioned in prior months, we believe the most salient factors driving this are loose monetary policy, the resiliency of many corporations to manage through the crisis better than anticipated, and hopes that a COVID-19 vaccine will be successfully developed sooner rather than later.

These dynamics have driven down the unemployment rate from a high of 14.7% in April to 7.9% in September, while driving up both the PMI manufacturing index (from a low of 41.5 to 55.4) and the consumer confidence index (from a low of 85.7 to 101.8) over the same time period.  Of course, many of these metrics still remain well below the pre-pandemic levels, and the economy still faces challenges, such as a decrease in incomes and less robust consumer spending since the expiration of the government’s supplemental unemployment benefits.

Elsewhere, performance across fixed income indices was mixed in September, with most indices up or down slightly.  In mid-September, the Federal Reserve held rates near zero and indicated they would remain at this level for at least three years.  The Fed has been vocal about the need for additional support to fuel the recovery, with Federal Reserve Chair Jerome Powell also signaling uncertainty about whether the rapid pace of the recovery will persist.

Our outlook as we enter the final quarter remains measured.  While the risks that we have mentioned previously – namely the upcoming elections and developments with the global pandemic – remain, we believe Congress will eventually coalesce to provide additional stimulus and that a vaccine will be approved in coming months.  If both of these come to fruition, we believe the recovery will continue and that bouts of volatility will be short-lived.

The monthly Market Overview is written by two members of MACRO’s Investment Committee, Mark Cortazzo, CFP®, CIMA®, and Christopher Moffett, CFA.


  1. Bloomberg: Beneath an S&P Rout Is a Moment for Value Shine: Taking Stock. Accessed October 2, 2020.

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