Following the “2020: Tale of two quarters” discussed in last quarters market commentary, global equity markets continued their positive momentum in the 3rd quarter. The move higher was broad based across both international/US companies and small/large cap companies. Growth companies led the way for equities and commodities had a particularly strong quarter. This is reflected in the performance of the two NERT model allocation holdings: T. Rowe Price Growth Stock Fund (+12.1%) and the PIMCO Commodity Real Return Strategy Fund (+11.7%). The rally was in part due to the world continuing to open up from the Covid-19 lockdowns. While there is still a long way to go to full recovery, volatility in equity markets is down substantially from its peak in March.
Looking ahead to the 4th quarter, which historically is the strongest quarter for the US equity markets, the focus will be on US elections, the potential next round of government fiscal stimulus and Covid-19. As we approach the US elections on November 3rd, investors are keeping a close eye on the US Presidential and US Senatorial elections across the country. If Biden wins the Presidency and the Democrats take control of the Senate, they would have a “unified” government, meaning the party would be in control of the Senate, House, and Presidency. This would allow the party to move forward with their planned agenda. If Trump is re-elected as President, or Republicans retain control in the Senate, then it would be a “divided” government and policy changes would be harder to execute and would require support from both parties. To put this in context the last two Presidents (Barrack Obama and Donald Trump) started their presidential terms with a unified government. At this time, it is still too close to tell what the outcome will be. In terms of fiscal stimulus, another round is actively being negotiated. It is surprising to us that a deal has not been reached as of this writing, but we are optimistic that a deal will be achieved either before or after the election. Finally, Covid-19 continues to be the biggest factor in economies globally. The release of new therapeutics (“Veklury”) promises to improve patient outcomes but no vaccines currently approved.
. 3rd QTR 1YR 3YRS 5YRS
Stable Income 3.07% 4.12% 3.72% 4.09%
Conservative Income 4.17% 4.82% 4.62% 5.36%
Traditional Pension 5.99% 6.28% 5.99% 7.40%
Equity Oriented 7.75% 5.92% 6.19% 8.01%
NERT Model Allocation – Choices for every investor
The NERT model allocations are designed to help participants build diversified allocations to capture the major market sectors and a variety of management styles. The NERT model allocations are designed to allow any investor to participate in proven ways to reduce risk and improve returns over longer periods.
As communicated in April, given the current limitations on withdrawals from the Principal U.S. Property Fund, our current model allocations do not include the Principal U.S. Property Fund.
Andrew Casteel, CIO, CFP
Acorn Financial Advisory Services, Inc.