Market Share Newsletter Vol 2 Issue 23


September 22, 2020

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Last week, my family traveled to Denver to see our son since our trip planned for May was cancelled. Although we were apprehensive about traveling, we were ready to enjoy outdoor activities and the unique restaurants around the city.
A couple of observations pre-trip: our flights were changed a few times due cancellations and flying was much cheaper than a year ago–though not a big surprise. The planes were full, but the airports were quiet (particularly Dallas/Fort Worth) as many restaurants and shops are still closed.
Denver, like most major metropolitan areas, appeals to many with its vast dining and entertainment offerings. Similar to cities around the nation, adaptations have been made to dining and entertainment to accommodate a “safer” experience. Many people were dining out thanks to Denver’s various street closures that were designed to accommodate outdoor tables, expanding the dining capacity of many restaurants. Restaurants are also permitted to sell alcohol for carry-out. Both of these tactics are small steps to ease the pain of dining limitations during the pandemic.
We have written about high frequency data over the past six months to measure how fast the economy is recovering. While we have seen many areas of the economy recover to near pre-pandemic levels, travel and entertainment are two definitive exceptions. Last year on average, 2.2 million people passed through Transportation Security Administration (TSA) checkpoints. Today, TSA checkpoint numbers are just 33% of the level they were just a year ago. The 33% sounds discouraging but it is an improvement from 10% in May.
According to, travel represents 1 out of every 10 jobs worldwide (or 319 million people). The TSA checkpoint numbers represent what the travel industry is experiencing worldwide. So how long will it take for travel to return to pre-pandemic levels? The quiet airport indicates that we still have a long way to go.
After my trip last week, I feel very fortunate to be able to continue to serve clients in a professional capacity throughout this pandemic. From all of us at 1st Source, we appreciate the privilege to serve you through the short-term market uncertainties and look forward to the long-term stability of the future ahead.
Thank you for working with us.
Paul Gifford, CFA
Chief Investment Officer
Wealth Advisory Services
Investment Management Group
Erik Clapsaddle, CFA, CFP®
Vice President and Senior Fixed Income Portfolio Manager
Wealth Advisory Services
Investment Management Group
Considerations for your portfolio

The Economy

  • Initial jobless claims in the United States have continued to decline and most recently hit their lowest level of 860,000 since the start of the pandemic. Continuing jobless claims (those that have filed a claim for at least two weeks) is a less volatile employment gauge and has also continued to descend, but is still at 12.6 million claims. For relative comparison, in May 2009, continuing claims reached a recession high of 6.6 million.
  • Consumer confidence, as measured by the University of Michigan Consumer Sentiment index, reached its highest level in six months as both the consumers’ sentiment on current conditions and economic expectations improved.
  • Both housing starts and building permits unexpectedly fell in August. The tropical storm in the gulf coast was largely attributable for the decline in the South, but the Midwest reported the biggest year-over-year (YoY) increase in single family housing starts of 41.4%.
  • The monthly change in July for Japan’s industrial production increased by its largest amount on record. The 8.7% increase in production is an impressive and quick bounce-off of March through May’s declines. However, looking a little deeper reveals that Japan’s industrial production in July was down 15.5% compared to one year ago.
Economic Data: Recent
  Actual Survey Prior
FOMC Rate Decision (upper bound) 0-0.25% 0-0.25% 0-0.25%
Retail Sales Advance MoM 0.6% 1.0% 0.9%
Housing Starts 1416k 1488k 1492k
Consumer Price Index (CPI) MoM 0.4% 0.3% 0.6%
Economic Data: Upcoming
    Survey Prior
Change in Nonfarm Payrolls   900k 1371k
ISM Manufacturing   55.5 56.0
University of Michigan Sentiment   79.1 78.9
New Home Sales   890k 901k


  • FedEx Corp reported remarkable quarterly earnings last Tuesday as they earned $4.87 per share in comparison to the $2.69 earnings per share that was expected. The most impressive part of the quarter was their 10% beat on revenue as they reported $19.3 billion vs. the expected $17.6 billion. This is a growth rate of 13.3% over same period one year ago.
  • Bank stocks around the globe fell this past Monday as investigative journalists reported close to $2 trillion was laundered within the United States banking system between 1999 and 2017. The report is clearly focused on the largest global banks and specifically mentions HSBC, Standard Chartered, Bank of New York Mellon, JPMorgan Chase, and Deutsche Bank. Much of this activity has already resulted in fines and other penalties from U.S. authorities.
  • The past month has been a rare but good month for developed international equities as they have outperformed U.S. equities by over 200 basis points. The primary reason for the U.S. equity underperformance has been attributable to the information technology and communication services sectors as they are down approximately 4.6% and 4% over the same time frame.
Equity Index Values and Total Returns
  Value YTD 1-Year
S&P 500 3,281.1 2.96% 11.93%
Dow Jones Industrial Average 27,147.7 -3.17% 3.04%
NASDAQ Composite 10,778.8 21.03% 34.35%
Russell 2000 (small-cap index) 1,485.3 -10.10% -3.16%
MSCI EAFE (developed intl.) 1,856.9 -6.79% -0.07%
MSCI Emerging Markets 525.1 -0.47% 9.18%

Source: Bloomberg

Fixed Income, Commodities and Currencies

  • The Federal Reserve announced last week that they do not plan to raise rates again until the economy has reached full employment, inflation has reached 2%, and is on course to moderately exceed 2% for some time. Given that policy, the Fed chose to maintain their current target interest rate policy range of 0% - 0.25% last week.
  • The Consumer Price Index (CPI) is the most popular inflation index in the United States and has recorded its highest average three-month increase since August 2008 based on monthly increases. Though we see this as a temporary move due to prices moving off the bottom during the worst of this recession, it has still been a very notable three-month increase. The Bloomberg Barclays Treasury Inflation Protected Securities (TIPS) index has returned 3% over the past three months while the comparable fixed-rate index has only returned 1%.
Fixed Income Index Yields & Total Returns
  Yield YTD 1-Year
B’berg Barclays Inter Govt./Credit 0.64% 6.00% 6.78%
B’berg Barclays US Aggregate Bond 1.17% 6.96% 7.60%
B’berg Barclays US Corp.High Yield 5.73% 0.82% 3.12%
B’berg Barclays Municipal Bond 1.30% 3.41% 4.49%
Key Interest Rates
  9/21/20 12/31/19 9/24/15
Federal Funds Target Rate 0-0.25% 1.5-1.75% 0-0.25%
3-Month LIBOR 0.23% 1.91% 0.32%
2-Year U.S. Treasury Note 0.14% 1.57% 0.67%
10-Year U.S. Treasury Note 0.67% 1.92% 2.13%
Prime Rate 3.25% 4.75% 3.25%
Commodities & Currency
  9/21/20 12/31/19 YoY Change
Gold 1,910.6 1,550.6 23.92%
Crude Oil 39.3 61.1 -31.85%
Natural Gas 1.84 2.19 -27.55%
Corn 369.8 387.8 -0.27%
Soybean 1022.5 943.0 16.45%
USD: Euro 1.177 1.121 6.50%

Source: Bloomberg
The information in this email was prepared from sources believed to be reliable; it is for informational purposes only and does not provide recommendations based on the investment objectives, financial situation, or needs of any individual or entity. Past performance is no guarantee of future results. A risk of loss is involved with investments in stock markets. The information in this email is not a comprehensive statement of the matters discussed. Unless specifically indicated otherwise, this email is not an offer to sell or a solicitation of any investment products or other financial product or service or a confirmation of any transaction. If you have questions about the information in this email, please contact your trust administrator at 1st Source Bank Wealth Advisory Services or call 800 882-6935. Investment and Insurance products are:
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