Santander Investment Services
Quarterly Market Update

Santander Investment Services provides a Quarterly Market Update prepared by CLS Investments for our customers to stay up-to-date on the latest insights.

The following commentary summarizes prior financial market activity and uses data obtained from public sources. This commentary is intended for one-on-one use with your Santander Investment Services Financial Consultant only, as a resource to manage assets and evaluate investment portfolio performance.

  • Quarterly Review
  • Market Observations
  • Market Insights

Quarterly Review

Quarter in Review

Well, another quarter of this crazy year is in the books and it was a good one for investors in our major markets. In fact, it was hard to find a major asset class that did not deliver returns above cash again in Q3. Global stocks (Morningstar Global Market Large-Mid Index; Source: Morningstar Direct, as of 9/30/2020) were up over 8%. Similar for the S&P 500 Index (Source: S&P Dow Jones Indices, as of 9/30/2020), which was up about 9%. Although September was a negative month for stocks, the quarter ended higher for most of our investors.

Many investors are asking if we are out of the woods yet and can markets move higher? There are many reasons to believe they can – including accommodative monetary and fiscal policies, but also some reasons why they may not – including the upcoming election.

Our Chief Investment Officer (CIO), Rusty Vanneman, points out some reasons to be optimistic:

  • The Federal Reserve (and other global central banks) are set to continue to provide support to the global markets.
  • Fiscal response has also been massive from around the globe and talks for more stimulus currently taking place.
  • Investor sentiment continues to be negative, which has tended to be a bullish sign for stocks.

Then others to remain cautious:

  • A pick up in Covid-19 cases in the U.S.
  • U.S. Political season heating up can cause volatility.
  • US tech stocks at high valuations.

One thing is for certain, expect volatility in both directions – big moves higher and lower – in the months to come leading up to the election. We note that election years typically are more volatile than non-election years with volatility tending to go down after the election. We recommend keeping politics out of your well thought-out, long-term investment plan. Stay invested and stay well.

Market Observations

Politics and Investing Do Not Mix

“I’m worried about the outcome of the election and what it may mean for the markets. Should I be reducing risk?”

This is a great question and one we get (not surprisingly) every three or four years. The answer is simple. As the chart below from Invesco clearly shows, markets do not typically react to which political party is in the White House. Stocks create wealth by participating in the long-term growth of corporate profits.


Consider that various firms on Wall Street have tried several times to appeal to the political biases of investors, and these attempts have failed. Exchange Traded Funds (ETFs), such as GOP and DEMS and PLCY, have all closed due to little demand, lack of returns, and no academic basis. I know it’s hard, but we must strive to keep politics and investing separate.

Market Insights

Is the Economy Healing?

 Thankfully, the answer to that question appears to be ‘yes’. With the help of a brand-new series of economic data (!), we are now able to review how the economy has recovered, thus far, without relying on GDP data, which typically lags significantly. The New York Federal Reserve has developed a weekly economic index (WEI) data point, which utilizes daily and weekly data to generate a real-time expectation of GDP growth. The index was created with data going back to 2008, as you can see here, and in the graph below. It includes 10 high-frequency data points, such as jobless claims, same-store sales, steel production, fuel sales, and electricity output, amongst others. It’s pretty exciting — a brand new economic data series doesn’t just pop up all that often! The potential benefit of high-frequency economic data is, of course, having more up-to-date information. GDP has a quarterly lag and, as a result, typically doesn’t provide anything too shocking when it comes out. As we know, the stock market and the economy are not the same thing, but stocks have typically reacted and are impacted by economic data. However, stocks are also forward-looking, whereas economic data is backward-looking. This new high-frequency data series more closely aligns with how the stock market has reacted. This is worth noting because you can see the decline in WEI has been massive and unprecedented. The stock market did drop 30%+ earlier in the year, but due to the quick recovery, the blip isn’t as noticeable when looking at year-over-year performance. While many may be focused on the huge decline in economic activity, this new data series is one of our first glimpses into the massive rebound we’ve seen.


While we are still below water from 2019 economic activity, we have bounced off many of the lows and continue to do so. I believe this helps to explain the rebound in stocks, which many investors have scratched their heads about. Stocks appear to be pricing in a return to more normal economic activity, at some point in the future.

Thank You.

As always, a sincere thank you for reading. If you have any questions or feedback, please let me know.

Stay balanced, and stay the course.


This material is authored by CLS Investments, LLC and is being presented by Santander Investment Services. The information contained in this material should not be construed as an endorsement or adoption of any kind by Santander Investment Services or Santander Securities LLC, who are not affiliated with CLS Investments, LLC. The views expressed herein are exclusively those of CLS Investments, LLC, and are not meant as investment advice and are subject to change. No part of this report may be reproduced in any manner without the express written permission of CLS Investments, LLC. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation, and the particular needs of any specific person. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed here and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security's price or value may rise or fall.

The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. All indices are unmanaged and investors cannot invest directly into an index.

The Morningstar Global Market Large-Mid Index measures the performance of the Global Markets’ equity markets targeting the top 90% of stocks by market capitalization. All indices are unmanaged and investors cannot invest directly into an index.

An Exchange Traded Fund (ETF) is a type of Investment Company whose investment objective is to achieve the same return as a particular index, sector, or basket. To achieve this, an ETF will primarily invest in all of the securities, or a representative sample of the securities, that are included in the selected index, sector, or basket. ETFs are subject to the same risks as an individual stock, as well as additional risks based on the sector the ETF invests in.

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