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Updates from the EWM Team:
Financial updates, tips, and news you can use.

EWM Updates

Market News Thumbnail

Market News

We have taken time to discuss the US Treasury yield curve in the past, but we wanted to take a moment to point out some of the issues currently infecting the broader fixed income market. Due to the pandemic and the intense market constriction earlier this year, the Federal Reserve needed to take action to make sure that there was liquidity in the market. They did an admirable job with that, injecting enough cash into the system to keep the gears of finance moving when everybody else was too scared to take a risk. What they have also done is to destroy (in the short term) the risk/reward interplay in the fixed income markets.

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Market News

The pandemic unleashed some unforeseen consequences, both negative and positive on the average household in the US. While there is still much to be done to fully recover, we have seen some things that could point to good outcomes when full mobility has been restored.

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A Pumpkin's Dignity

Who will speak on behalf of the pumpkin during this Thanksgiving? Is it not enough that his dignity is squashed every Halloween as he is gutted and carved into buffoonish jack-o'-lanterns? Or that at the start of every autumn, hordes of these noble gourds become grist for the corporate pumpkin spice mills that churn out the ubiquitous orange dust used to fill our lattes and infuse our candles? "The spice must flow," they insist. And now, pumpkin pie is to be the default dessert for our holiday meals. We are asking for too much sacrifice from the pumpkin. In these desperate times, why not try a desperation pie instead?

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Quirky Collective Nouns

A murmuration of starlings, a parliament of owls, a mischief of magpies, and a murder of crows. One reason English has more words than other language is its considerable collection of quirky collective nouns. The origin of this phenomenon is said to be The Book of Saint Albans, a hunting manual for the medieval gentleman of leisure that provided a list of "terms of venery" - collective nouns used to identify groups of specific animals that also conveyed a hint about those animals' essential characteristics. These words were meant to help hunters better understand the behavior of their quarry. (Note to self: stay away from crows).

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Market News Thumbnail

Market News

It is time to check back in on our old friend the yield curve. We know that the Federal Reserve is looking to keep the short end of the curve very low, but we are seeing an upward movement on the middle part of the curve (see the change from the 3/30/2020 line to the 11/13/2020 line in the chart above). This is normal. There is only so low that the 10-year Treasury can go, and there is only so much supply that the market is willing to soak up. This means that when there is more and more issuance, yields have to go up to entice investors to take on the risk of holding a longer-dated bond. The Federal Reserve has been doing its best to monetize the debt created by the large deficits over the past six months, and we don’t doubt it will continue to do such going forward.

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The Grammatical Grumblebug

Every successful franchise has its spinoffs. Happy Days had Joanie Loves Chachi, 21 Jump Street had Booker, and Baywatch had Baywatch Nights. Of course, On A Lighter Note wasn't immune to this trend. In what was possibly an ill-conceived idea, the On A Lighter Note writing staff worked on a short-lived spinoff called "The Grammatical Grumblebug" which was to feature brief, hard-hitting, in-your-face commentary on grammar topics.

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Market News

Last week, favorable feelings about factories factored into the broadly positive outlook on future domestic economic growth. On Monday, November 2nd, the Institute of Supply Management (ISM) released the October reading of its Manufacturing Purchasing Managers' Index (PMI), a widely followed survey of manufacturing businesses across the country. The index rose to 59.3 last month, its highest level in over two years. For this index, a reading above 50.0 indicates that the managers of manufacturing companies see economic growth in the sector, with a higher reading indicating greater growth prospects. A score below 50.0 signifies that the industry expects economic contraction. The number for October smashed analysts' expectations, and it indicates that sentiment in the sector is strengthening to pre-COVID levels after the sharp downturn in the spring of 2020 (see the chart below).

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Geese Are Pure Evil

It is a universally agreed upon fact of nature that geese are pure evil, but what about their feathered friends, the ducks? They always seem to be able to waddle away from scrutiny. Sure, in cartoon form, they appear to be perfectly acceptable, but what do we know about the actual birds? Well, clues about their corrupt character can be discovered in the everyday words we use that refer to these waterfowl.

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Market News

With the pullback over the last two weeks, the S&P 500 is now just +2.77% on the year while the Dow Jones Industrials index is -5.38%. We have highlighted the disparity in returns a few times this year when looking at winners and losers from the COVID crisis. Only 27% of the companies in the Dow have a positive year-to-date return as of 10/30.

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Market News Thumbnail

Market News

Many students of probability theory (well, this author at the very least) have stumbled when they are confronted with the birthday paradox: What is the smallest number of people that need to be in a room for there to be a greater than 50% chance that two people in the room share the same birthday?

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Market News

We saw a divergence in economic recovery data last week. Retail sales have been on quite a run and popped again in September, breaking the pre-COVID trendline to the upside (shown in the chart directly below). This is good news for the economy. Overall retail has rebounded even as some sub-sectors have fallen on rough times.

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Market News

While news about the upcoming election and rumors about future federal stimulus packages get much of the recent credit or blame for the stock market's ups and downs, a less provocative market mover officially begins this week: quarterly corporate earnings season. Ultimately, a company has to at least promise investors future earnings and revenue streams for its stock to find value in the public marketplace. And the third quarter (Q3 2020) earnings season officially begins when the four largest banks by assets - Citigroup, JPMorgan Chase, Bank of America, and Wells Fargo - release their financial reports this Tuesday and Wednesday. With the market's emphasis on year-over-year statistics and 2020's sharp economic slump brought about by the coronavirus and subsequent government lockdowns, the numbers are expected to be historically bad, but what matters is if the businesses beat forecasts.

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Market News Thumbnail

Market News

While news about the upcoming election and rumors about future federal stimulus packages get much of the recent credit or blame for the stock market's ups and downs, a less provocative market mover officially begins this week: quarterly corporate earnings season. Ultimately, a company has to at least promise investors future earnings and revenue streams for its stock to find value in the public marketplace. And the third quarter (Q3 2020) earnings season officially begins when the four largest banks by assets - Citigroup, JPMorgan Chase, Bank of America, and Wells Fargo - release their financial reports this Tuesday and Wednesday. With the market's emphasis on year-over-year statistics and 2020's sharp economic slump brought about by the coronavirus and subsequent government lockdowns, the numbers are expected to be historically bad, but what matters is if the businesses beat forecasts.

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Market News

We saw incremental improvement in the unemployment rate in September with the headline number, called the U-3 rate, down to 7.9% according to the latest Jobs Report released last Friday. The report was not straightforward, as these things never are, but there are good items along with some bad. The good news is that Un- and Underemployment rates are below their Global Financial Crisis highs, and heading in the correct direction. Large unemployment spikes take time to work themselves out, and the quick rebound is a step in the right direction.

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Market News

Investors, both real and fictional, have tried to discern seasonal swings in stock prices for quite some time. Any anomaly in the chronology of return data can be given a name and pushed as the trend that will help eke out better performance for a portfolio. The traditional strong showing for stocks at the start of each year is labeled the "January Effect". An unusual clustering of very bad trading days in past Octobers (the month has seen two "Black Mondays", one in 1929 and one in 1987) is labeled the "October Effect". However, as the chart directly below shows, if we look over the last one hundred years or so of domestic stock returns, one month sticks out like a sore thumb - September, with an average -1.0% total return. Coincidentally, after four losing weeks, the S &P 500 is down -5.66% this month as of the market close on September 25th. Most market analysts would attribute the decline following four strong positive months to concerns that there won't be a second fiscal stimulus package this year from Congress, or anxiety about overvalued shares, or even jitters over the upcoming election. Nevertheless, is it possible the downturn was helped along by a mysterious "September Effect"?

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Mister Mxyzptlk

We can't let September pass without mentioning that it was during this month way back in 1944 that Superman's greatest adversary was introduced: Mister Mxyzptlk. (Although the name might look intimidating at first glance, it is really quite easy to pronounce once you realize that the y is silent, the z is the beginning of a nasal diphthong, and the stress is placed on the penultimate syllable.)

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