September Investment Bulletin

August key drivers

• Although COVID-19 is still very much impacting the global economy, markets are forward looking and are pricing in a return to growth in 2021. The S&P 500 posted a gain of more than 7% in August, while the MSCI EAFE and MSCI EM indices gained over 5% and 2%, respectively. With interest rates stuck close to 0%, risk assets continue to attract investor capital.
• Congress failed to deliver on a new stimulus bill before heading out for the August recess. The House is still insisting on a larger bill than what the Senate is willing to endorse. Markets did not seem to be too concerned that a deal could not be reached, but the longer one is delayed, the risk that economic activity will be negatively impacted increases, which in turn, could affect markets.
• Earnings season for Q2 wrapped up during the month with companies posting much better Q2 earnings than anticipated. According to FactSet data, over 84% of S&P 500 companies reported better-than-expected earnings with 65% reporting positive revenue surprises. Most of the positive news was driven by technology, materials, healthcare and industrial companies. Looking into 2021, earnings growth estimates for the S&P 500 have edged higher since the middle of the year, and as of now, earnings growth is estimated at about 29% for next year, according to FactSet.

What to watch in September

• Congress comes back from recess on September 8 with a focus on getting a new stimulus deal done and signed by the President. Although investors in August did not seem too concerned about the lack of an agreement, a deal in September is critical, as support for individuals and businesses has been curtailed during a time of high unemployment and elevated uncertainty.
• With the Federal Reserve continuing to hold rates lower and announcing in August their desire to let inflation run above their 2% target prior to tightening, markets will continue to be focused on the economic recovery that began in Q3. Although volatility related to virus news is trending lower, any positive news on virus developments (i.e., a vaccine) could be a tailwind for equities.
• With economic data in Q3 improving, September will be an important timeframe as we head into the end of the year. Recent economic data suggest the improvement in activity continues, and some firms have begun to increase their estimates for Q3 GDP growth in the U.S. According to the Atlanta Fed GDP tracker, the initial growth estimate in July was calling for 12% growth. As of the end of August, it has now increased to 28% growth in Q3.
• Campaigning for the presidency heats up with the first of three presidential debates to take place on September 29.

Bill Norris is chief investment officer and head of asset management for CIBC Bank USA. In this role, he oversees investment management, trust and estate services to individual and institutional clients of CIBC Bank USA. Bill also serves as a member of CIBC Private Wealth Management’s Asset Allocation Committee with more than 35 years of industry experience.

CIBC Private Wealth Management includes CIBC National Trust Company (a limited-purpose national trust company), CIBC Delaware Trust Company (a Delaware limited-purpose trust company), CIBC Private Wealth Advisors, Inc. (a registered investment adviser)—all of which are wholly owned subsidiaries of CIBC Private Wealth Group, LLC—and the private wealth division of CIBC Bank USA. All of these entities are wholly owned subsidiaries of Canadian Imperial Bank of Commerce.

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