CPI month-over-month beat expectations last week on Friday, coming in at 0.4%. This larger than expected increase in prices was driven by the sharpest monthly gain in used-vehicle in five decades. This data reflects the steady increase of demand and recovery of the economy to pre-pandemic levels of inflation.
16,750 firefighters were fighting 29 different fires around California on Sunday. At least 35 people have died and 4.5 million acres have been burned in the West Coast fires across California, Oregon, and Washington. The massive amount of smoke has caused air quality concerns in the Pacific Northwest and made it even potentially deadly to venture outside in places like Portland, Oregon. PG&E may cut power to more than 450,000 people in California to prevent live wires from sparking fires.
Senate Democrats blocked a slimmed down stimulus relief plan from passing on Thursday, stating that it didn’t provide enough relief.
Fixed Income Market:
Last week saw a renewed surge in new issuance as corporations continued to take advantage of both strong demand and the “risk on” trade in the credit markets. On the week, IG spreads were 2-3 bps tighter while HY spreads ratcheted in close to 20 bps. The move in HY reflects investors’ continuing reach for riskier assets in their quest for yield. With this most recent tightening, HY spreads are now at levels last seen in February and pre-COVIID. In today’s environment, we are not surprised that the price action in the HY market remains very tightly correlated with the performance of US equity markets.
Specific to Leumi, retail activity remains muted. We see moderate interest in new issue Structured Notes but very light activity in secondary trading. With Rosh Hashanah beginning Friday evening, we anticipate a very quiet end to the week.
Lipper Fund flow data for the week showed:
Domestic Equity Funds down $6.0 BLN
IG Bond Funds up $6.5 BLN
HY Bond Funds down $750 MLN
Municipal Bond Funds up $750 MLN
MMKT Funds down $27.4 BLN
Domestic Equity Funds down $8.9 BLN
IG Bond Funds up $10.7 BLN
HY Bond Funds up $319 MLN
Municipal Bond Funds up $600 MLN
MMKT Funds down $4.1BLN
All three major indices were down for the second week in row. Tech once again led the way lower with NASDAQ off 4.06%. S&P 500 and DJI followed being lower by 2.49% and 1.61% respectively. The move was once again broad based with 10 out of 11 sectors finishing the week negative. Materials were again modestly higher. Energy was the big loser on the week finishing down 6.45%, with Technology and Communication Services down 3.12% and 3.04% respectively. Value continued to outperform Growth as Russell 1000 Value index was down 1.48% vs Russell 1000 Growth index down 3.45%. The CBOE Volatility Index, retreated last week from 30.7 back to 26.41. On the brighter side both S&P and NASDAQ are holding major support levels. This week should be telling as to whether we break support and continue lower or get a bounce with the possibility of a continued move higher.
Shanah Tovah!! This week starts a stretch of the Jewish holidays through the end of September. This week’s main event will be the FOMC meeting (Wednesday). The market will be focusing on the Fed’s language with regards to any new monetary policies in the upcoming months. The USD continues to drift lower as geopolitical risks continue to rise, uncertainties with regards to the time frame of receiving the results in upcoming US presidential election, and the ongoing COVID-19 pandemic have all weighed on the dollar.
How Much Life Insurance Do I Need?
September is Life Insurance Awareness Month, and research from LIMRA finds that “46% of Americans are uninsured and many more do not have enough coverage.” For the most accurate assessment of one’s needs, it’s best to meet with a CFP®, wealth manager, or insurance professional. Otherwise, here are a few rules of thumb that can be used:
- Multiply your gross income by 10 or 12 – this rule provides the most generic calculation and may provide too much or too little coverage depending on one’s stage in life, family size, spending habits, etc. However, it’s better than not having any coverage.
- Multiply your gross income by 10 and add $100k per child for college expenses – this rule is a bit more specific for one’s family situation, but it does not account for the costs associated with a particular school. Again this rule could leave one with a coverage surplus or a coverage gap.
- Use the DIME formula – this formula is most similar to the “Human Life Value” method that many insurance practitioners follow. It will be the most customized to one’s specific situation of the three covered here.
- Debt and final expenses – Add up debts not including your mortgage (i.e. – credit cards, car loans, student loans, etc.), plus an estimate of funeral expenses
- Income – Decide how many years surviving family members would be reliant upon one’s income (i.e. – years remaining before retirement or other milestone)
- Mortgage – Calculate the amount needed to pay off one’s mortgage
- Education – Estimate the cost of sending one’s children to college
As with any rule of thumb, it may not apply to each person’s unique circumstances. Additionally, one’s circumstances are likely to change as time goes on, thus making it more important to work with a professional who will periodically review the insurance coverage.
Last Week's Economic Data 9/14
|Last Week's Economic Data||Actual||Survey|
|Initial Jobless Claims||884k||850k|
|This Week's Economic Data||Release Date||Survey|
|Retail Sales Advance MoM||9/16/20||1.0%|
|FOMC Rate Decision (Upper Bound)||9/16/20||0.25%|
|Initial Jobless Claims||9/17/20||850k|
This Week's Economic Data 9/14
|Interest Rates||Current||WoW||MoM||YoY||US Swap Spreads||Current||WoW||MoM||YoY|
|1 Month Libor||0.15%||(0.4 bp)||+0.1 bp||(187.3 bp)||12-Month||+10 bp||(1.5 bp)||(1.2 bp)||+3.8 bp|
|3 Month Libor||0.24%||(0.5 bp)||(3.3 bp)||(190.2 bp)||2-Year||+8 bp||(0.2 bp)||(0.7 bp)||+14.5 bp|
|6 Month Libor||0.27%||(1.9 bp)||(5.8 bp)||(179.6 bp)||3-Year||+7 bp||(0.6 bp)||+0.1 bp||+16.8 bp|
|12 Month Libor||0.40%||(1.8 bp)||(5.8 bp)||(164.7 bp)||5-Year||+6 bp||+1.4 bp||+0.6 bp||+18.3 bp|
|Fed Funds Effective||0.09%||(1.0 bp)||(204.0 bp)||7-Year||+2 bp||+1.2 bp||+1.1 bp||+19.5 bp|
|SOFR||0.09%||(1.0 bp)||(206.0 bp)||10-Year||+1 bp||(3.5 bp)||(2.5 bp)||+61.0 bp|
|US Treasury Yields||Current||WoW||MoM||YoY||30-Year||(36 bp)||(3.9 bp)||+0.7 bp||+81.4 bp|
|12-Month||0.13%||+0.8 bp||(0.3 bp)||(173.9 bp)||Equity Markets||Current||WoW||MoM||YoY|
|2-Year||0.13%||(1.0 bp)||(1.2 bp)||(166.7 bp)||Dow Jones||27,987||+1.2%||+0.2%||+2.8%|
|3-Year||0.15%||(1.9 bp)||(2.6 bp)||(160.4 bp)||S&P 500||3,394||+1.6%||+0.6%||+12.8%|
|5-Year||0.25%||(4.4 bp)||(4.0 bp)||(149.6 bp)||NASDAQ||11,016||+1.5%||(0.0 %)||+34.7%|
|7-Year||0.45%||(5.7 bp)||(5.3 bp)||(138.6 bp)||Currencies||Current||WoW||MoM||YoY|
|10-Year||0.66%||(1.0 bp)||(1.2 bp)||(166.7 bp)||Euro||1.1863||+0.4%||+0.2%||+7.8%|
|30-Year||1.41%||(1.0 bp)||(1.2 bp)||(166.7 bp)||Japanese Yen||105.6800||+0.6%||+0.9%||+2.3%|
|US Swap Rates vs 3ML||Current||WoW||MoM||YoY||British Pound||1.2865||(2.3 %)||(1.7 %)||+3.5%|
|12-Month||0.23%||(0.8 bp)||(1.4 bp)||(170.0 bp)||Canadian Dollar||1.3182||(0.6 %)||+0.6%||+0.4%|
|2-Year||0.22%||(1.2 bp)||(1.9 bp)||(152.2 bp)||Australian Dollar||0.7285||+0.1%||+1.6%||+6.1%|
|3-Year||0.22%||(2.5 bp)||(2.5 bp)||(143.7 bp)||Swiss Franc||0.9077||+0.9%||+0.2%||+9.4%|
|5-Year||0.32%||(3.0 bp)||(3.4 bp)||(131.3 bp)||Israeli Shekel||3.4395||(1.7 %)||(1.0 %)||+3.1%|
|7-Year||0.47%||(4.5 bp)||(4.3 bp)||(119.2 bp)||Bitcoin||10,689||+5.3%||(9.2 %)||+4.6%|
|10-Year||0.67%||(4.5 bp)||(3.7 bp)||(105.7 bp)||Commodities||Current||WoW||MoM||YoY|
|30-Year||1.05%||(4.8 bp)||(0.5 bp)||(85.3 bp)||Gold||1,955||+1.1%||+0.5%||+31.3%|
|Crude Oil||37||(6.2 %)||(11.2 %)||(32.0 %)|