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Key Takeaways & Insights

Equity markets were down roughly 3.5% today and are now down 5.5% for the week. Find out what’s creating this anxiety and what it means for investors.


  • Concerns over COVID-19, another fiscal package and the upcoming election are fueling the recent market volatility.
  • Strong economic results in housing and business spending are being offset by wary consumers.
  • Given how quickly events can change, investors should not try to time the markets based on current headlines.

Equity markets were down roughly 3.5% (350 basis points) today and are now down 5.5% (550 basis points) for the week. After a nice rebound from the depths of the March lows, the U.S. equity market has gotten a bit wobbly over the past two months, with many crosscurrents creating anxiety:

  • Spike in infection rates, increased testing and pandemic fatigue. Europe has seen a 40% increase in mortality over the last week, with the most significant rise in death rates occurring in France, Spain, the U.K., Netherlands, and Russia. President Macron in France and Chancellor Merkel in Germany are calling for the reimplementation of restrictions but emphasized they wouldn’t be as broad or harsh as those imposed in the spring. Hospital capacity in the U.S., particularly that of intensive care beds, is being stretched, but not yet close to the same level experienced in April and May. More knowledge of the disease, better treatment options, and less severe cases among the younger population have been mitigating factors.
  • Vaccine. It’s becoming more apparent that approval and broad distribution of a vaccine won’t occur until the spring of 2021 at the earliest. Once approved, full availability will be limited by manufacturing capacity and logistical constraints. There’s also a strong possibility that consumers will be hesitant to adopt what many believe may be a rushed and not thoroughly vetted vaccine product. News emanated overnight from a U.K. study that a vaccine may only be a temporary cure and won’t hold off the disease for an extended period.
  • Fiscal package. A compromise fiscal relief package seems unlikely until after Election Day. Major stumbling blocks between the parties are the aid for state and local governments, liability protection for businesses, and the final verbiage around a testing/tracing program. The prospect of delayed relaxation of capacity constraints and the reimposition of previously lifted restrictions mean consumers need continued income replacement. Additionally, businesses need access to loans to keep them afloat. We have often surmised that a market reaction would be necessary to prod the two sides to an agreemeant. Perhaps a portion of this equity selloff is the delivery of that message.
  • Election Day. The election is only days away, and the markets expect and have grown more comfortable with a Biden victory accompanied by a Democratic Congress. As President Trump has narrowed the difference both nationally and in key electoral states, the prospect of a contested election and a delay in declaring a victor has grown.

U.S. economic statistics have begun to show a wider gap between strong housing and business spending results, which are being offset somewhat by a more hesitant and wary consumer.

  • The September durable goods orders report strongly exceeded the August report and the consensus estimates. The more informative core (non-defense, ex-aircraft) orders also exceeded estimates and is at its highest level since 2014. Durable goods shipments, a component of GDP, are now 1.6% above pre-pandemic levels.
  • Homebuilder confidence, housing starts, and both new and existing home sales have fully rebounded and now exceed pre-pandemic levels. Delayed demand from the millennial generation and the pandemic-induced desire to leave the densely populated cities have produced a longer-term advance in the sector. Low inventories and the upward price pressures they bring have had a minimal effect on demand so far.
  • The timelier October Consumer Confidence survey from the Conference Board is showing some stagnation, if not regression, in the consumer spending outlook. Consumers’ assessment of their current situation is fine, but they are beginning to express more concern about the future. Consumer spending comprises nearly 70% of U.S. GDP. So, any slowdown in this sector will directly impact the continuation of the economic recovery.

What This Means for Investors

Although days like today and weeks like this week can be disquieting, there are distinct market tailwinds that should prevent any imminent collapse in the equity markets. The Fed’s extremely loose monetary policy should keep interest rates low and, at the same time, prevent any credit freeze. Fiscal policy, despite the political acrimony, should eventually produce some level of income and business support. The progression of the second wave of COVID-19 is a major wild card to the outlook. However, the population has largely learned to adapt to the disease as we await a viable vaccine. Reported third-quarter corporate revenue and earnings are exceeding estimates, and analysts are upwardly adjusting estimates for the fourth quarter and 2021.

The point is not that these positives are definitive outcomes, but that they are possible outcomes as is the possibility of negative outcomes. Financial markets are anticipatory. As news on the virus, fiscal stimulus, and the election ebb and flow, the market is responding accordingly. It’s important to look out three months when a number of these issues should be resolved. Given how quickly the news changes, timing these market events can be perilous. At current levels, we think adjusting equity allocations down from the strategic asset allocation levels is unwarranted.

For more market insights, please contact a Cerity Partners advisor or visit the thought leadership section of

Meet the Author

Ben Pace

Partner & Chief Investment Officer

Ben is the Chief Investment Officer and a Partner in the New York office. He leads the firm’s Investment Committee and is a member of the Executive Committee. He has more than thirty-five years of experience in investment management. Ben has been featured in the Wall Street Journal and Reuters, and is a frequent commentator on Bloomberg TV and radio, Fox TV and CNBC, appearing regularly on network programs such as Power Lunch, The Closing Bell, Squawk Box, and Worldwide Exchange.

Prior to joining Cerity Partners, Ben was Chief Investment Officer and Head of Global Investment Solutions for Deutsche Bank Private Wealth Management in the U.S. In his role as CIO, he sat on the PWM Global Investment Committee, providing input on the U.S. economy and capital markets. He oversaw the investment strategy and asset allocation for PWM clients in the U.S. As Head of Global Investment Solutions, he brought together PWM’s capital markets and investment capabilities in an effort to provide an effective and consistent experience for clients. Prior to joining Deutsche Bank in 1994, he managed equity income funds for two investment organizations. During his tenure with those institutions, he also served as a securities analyst with a particular emphasis on the financial services and healthcare industries.

He earned his Bachelor of Arts in economics from Columbia University and Master of Business Administration in finance from New York University.

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James Lebenthal

Partner & Chief Equity Strategist

Jim is the firm’s Chief Equity Strategist and a Partner in the New York office. He has over twenty-five years of experience managing investment portfolios, and is a regular contributor on CNBC.

Prior to joining Cerity Partners, Jim served as the Chief Executive Officer and Chief Investment Officer of Lebenthal Asset Management LLC, where he developed, advised and served client relationships. Prior to joining Lebenthal Asset Management in 2007, he was a financial advisor for Goldman Sachs and a partner of investment firm Levy Harkins.

Jim currently serves as the Chairman of the Board of Trustees of Mizzentop Day School and as a Director of the Akin Hall Historical Association. He was a Lieutenant of and qualified as a nuclear submarine engineer in the United States Navy where he was awarded 2 Navy Commendation Medals and 4 Navy Achievement Medals.

Jim holds a BA in molecular biology from Princeton University, an MBA from The Wharton School of Business, and a Chartered Financial Analyst designation.

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Tom Cohn

Partner & Deputy Chief Investment Officer

Tom is the Deputy Chief Investment Officer and a Partner in the New York office. He has nearly ten years of experience in various investment management roles. Tom is a member of the Investment Committee, Investment Manager Selection Sub-Committee, the Compliance Sub-Committee and the Performance Monitoring Sub-Committee.

Before joining Cerity Partners, Tom served as an Investment Analyst at Spero-Smith Investment Advisers where he was responsible for the due diligence and analysis of third-party managers and assisted in global market and asset allocation research. Prior to joining Spero-Smith, Tom worked as a Registered Investment Advisor in Syracuse, NY, where he researched a factor-based investment strategy. He started his career as an analyst in the Corporate Debt Products group at Bank of America in Boston, where he worked on a team that managed the bank’s exposure to a portfolio of middle market and multinational companies.

Tom earned a Masters of Business Administration from the S.C. Johnson Graduate School of Management at Cornell University. At Johnson, he served as a portfolio manager on the Cayuga Fund, a student-run, market-neutral hedge fund. He earned a Bachelor of Science degree in Business Administration from Boston University. Tom holds the Chartered Financial Analyst® designation.

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