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  S&P 500 Index Dividend Payout Profile
Posted Under: Stock Dividends

 
View from the Observation Deck  
  1. As of 10/15/20, 383 of the constituents in the S&P 500 Index distributed a cash dividend to shareholders. There are currently 505 stocks in the index. 
  2. For comparative purposes, since 1980, the highest number of dividend-paying stocks in the S&P 500 Index at year-end was 469 (1980), while the lowest number was 351 (2001 & 2002), according to S&P Dow Jones Indices.
  3. Due largely to the economic fallout from the coronavirus (COVID-19) pandemic, 42 companies in the S&P 500 Index have suspended their dividend distributions so far this year and another 25 have cut their payout. 
  4. As indicated in the chart, Information Technology, Health Care and Financials contributed the most to the S&P 500 Index's dividend payout at 17.63%, 14.36% and 13.58%, respectively, as of 10/15/20 (see table).
  5. As of 10/21/20, data from Bloomberg indicates that the total dividend payments from the constituents in the S&P 500 Index will total an estimated $59.41 per share in 2020, up from $58.69 (record high) in 2019. The estimates for 2021 and 2022 were $61.41 and $64.95, respectively. The S&P 500 Index's dividend yield was 1.75% as of 10/21/20.
  6. The S&P 500 Index sector weightings are as follows (10/21/20): 28.10% (Information Technology); 13.93% (Health Care); 11.64% (Consumer Discretionary); 10.84% (Communication Services); 9.73% (Financials); 8.43% (Industrials); 7.00% (Consumer Staples); 3.11% (Utilities); 2.64% (Materials); 2.61% (Real Estate); and 1.96% (Energy), according to Bloomberg.
This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance, while the 11 major S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.  

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Posted on Thursday, October 22, 2020 @ 1:24 PM • Post Link Share: 
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  How Stocks Have Fared Since Donald J. Trump Was Elected President
Posted Under: Conceptual Investing

 
View from the Observation Deck  
  1. The presidential election is just 14 days away. Now seems like a good time to see how stocks have performed since Donald J. Trump was elected. 
  2. With respect to the stock market, perhaps three of the most defining dates for the Trump administration in its first term have been election day (11/8/16), the day the first round of tariffs on imported steel (25%) and aluminum (10%) were launched (3/8/18) and the day the S&P 500 Index peaked following an impressive 10-year, 11-month bull market run (2/19/20), in our opinion.  
  3. The negative toll on the global economy and securities markets from the escalation and spread of the coronavirus (COVID-19) has been substantial. The pandemic ended the bull market in stocks on 3/12/20, as measured by the S&P 500 Index. The silver lining in this story, however, is that we have experienced a significant rebound in the stock market since the sell-off stopped on 3/23/20. Compare the returns in point 4 below, to those in the last column in the table. 
  4. The following total returns reflect just how much the major indices in the table were punished during the coronavirus-induced sell-off (2/19/20-3/23/20): -27.84% (NASDAQ 100); -33.79% (S&P 500); -41.81% (S&P MidCap 400); -41.27% (S&P SmallCap 600); -33.61% (MSCI Emerging Markets Net TR); and -31.16% (MSCI Daily TR Net World (ex U.S.), according to Bloomberg. 
  5. The U.S. dollar, which can be a safe-haven destination for foreign investors, didn't strengthen under the Trump administration until the tariffs commenced on 3/8/18. From 11/8/16 through 03/8/18, the U.S. dollar declined by 7.85%, as measured by the U.S. Dollar Index (DXY), according to Bloomberg. From 3/8/18 through 10/16/20, the U.S. Dollar Index rose by 3.88%. The dollar did rally as much as 14.02%, from 3/8/18 through 3/20/20. 
  6. The bottom line is that stocks, as measured by the S&P 500 Index, have performed better than their historical average under Trump. 
  7. From 1926-2019, the S&P 500 Index posted an average annual total return of 10.20%, according to Morningstar/Ibbotson Associates. The 75.99% cumulative total return posted by the S&P 500 Index from 11/8/16 through 10/16/20 equates to an average annualized total return of 15.43%, according to Bloomberg. The 33.80% return from 3/8/18 through 10/16/20 equates to an average annualized total return of 11.80%. The S&P 500 Index is even up (4.16%) in the COVID-19 pandemic. 
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The NASDAQ 100 Index includes 100 of the largest domestic and non-financial companies listed on The NASDAQ Stock Market based on market capitalization. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI World (ex U.S.) Index is a free-float weighted index designed to measure the equity market performance of developed markets. The U.S. Dollar Index (DXY) indicates the general international value of the dollar relative to a basket of major world currencies.

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Posted on Tuesday, October 20, 2020 @ 12:44 PM • Post Link Share: 
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  US Stock Markets Ended Oct. 16, 2020
Posted Under: Weekly Market Commentary

 
Equities were generally positive last week. The S&P 500 Index was up 0.21% as Industrials and Communication Services were the top sectors and Real Estate and Energy were laggards. U.S. equity returns continue to ebb and flow as a government stimulus talks are played out in public. 3Q bank earnings started last week after JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, CitiGroup Inc. and Goldman Sachs Group Inc. all reported quarterly results. JPMorgan was up 0.31% on news they only added $600m in loan loss reserves, well below estimates and the $8.2b from 1Q and $10.4b from 2Q. Goldman Sachs fell 0.64% on news FICC sales and trading came in above analyst estimates but expenses rose by 6% driven by pay increases. Wells Fargo fared the worst of the big banks with a -9.64% return after favorable loan loss reserves were trumped by lower than forecast net interest income. Bank of America fell 4.42% and CitiGroup fell 3.87% as a flat yield curve continues to lower net interest income. Investment behemoth Blackrock Inc. announced record quarterly earnings of $9.05 a share. Company earnings were fueled by net fund inflows of $128b well ahead of the $99.5b estimates as they saw their AUM reach a record $7.81t. Royal Caribbean returned -17.25% last week as they announced plans to raise $1b in capital via debt and equity offerings to cover near term operating costs and repay some senior notes that are coming due. As election uncertainty continues, focusing on events that are likely to occur can add some investing clarity. The U.S. should have a vaccine sometime in the next few months, there will likely be another large round of federal stimulus in the next few months, the Fed will likely keep rates near zero for as long as the economy needs it and 2020 will provide very favorable comps going into 2021. We remain bullish on equities as there is no alternative to meaningful real returns in this low rate era.
Posted on Monday, October 19, 2020 @ 7:55 AM • Post Link Share: 
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  US Economy and Credit Markets Ended Oct. 16, 2020
Posted Under: Weekly Market Commentary

 
Equities were generally positive last week. The S&P 500 Index was up 0.21% as Industrials and Communication Services were the top sectors and Real Estate and Energy were laggards. U.S. equity returns continue to ebb and flow as a government stimulus talks are played out in public. 3Q bank earnings started last week after JPMorgan Chase & Co, Bank of America Corp, Wells Fargo & Co, CitiGroup Inc. and Goldman Sachs Group Inc. all reported quarterly results. JPMorgan was up 0.31% on news they only added $600m in loan loss reserves, well below estimates and the $8.2b from 1Q and $10.4b from 2Q. Goldman Sachs fell 0.64% on news FICC sales and trading came in above analyst estimates but expenses rose by 6% driven by pay increases. Wells Fargo fared the worst of the big banks with a -9.64% return after favorable loan loss reserves were trumped by lower than forecast net interest income. Bank of America fell 4.42% and CitiGroup fell 3.87% as a flat yield curve continues to lower net interest income. Investment behemoth Blackrock Inc. announced record quarterly earnings of $9.05 a share. Company earnings were fueled by net fund inflows of $128b well ahead of the $99.5b estimates as they saw their AUM reach a record $7.81t. Royal Caribbean returned -17.25% last week as they announced plans to raise $1b in capital via debt and equity offerings to cover near term operating costs and repay some senior notes that are coming due. As election uncertainty continues, focusing on events that are likely to occur can add some investing clarity. The U.S. should have a vaccine sometime in the next few months, there will likely be another large round of federal stimulus in the next few months, the Fed will likely keep rates near zero for as long as the economy needs it and 2020 will provide very favorable comps going into 2021. We remain bullish on equities as there is no alternative to meaningful real returns in this low rate era.
Posted on Monday, October 19, 2020 @ 7:52 AM • Post Link Share: 
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  Low U.S. Consumer Credit Default Rate A Nice Tailwind For Discretionary Stocks
Posted Under: Sectors

 
View from the Observation Deck  
  1. The S&P/Experian Consumer Credit Default Composite Index measures the default rates across first mortgages, bank cards and auto loans.
  2. The index registered a default rate of just 0.67% in August 2020, well below its 1.79% average since inception (July 2004) and significantly below its all-time high of 5.51% set in May 2009. It sits just above its all-time low of 0.66% set in June 2020, according to Bloomberg.
  3. The low default rate is encouraging considering it has remained subdued despite the economic fallout from the COVID-19 pandemic. 
  4. Year-to-date through 10/14/20, the S&P 500 Consumer Discretionary Index posted a total return of 29.66%, the second-highest return of the 11 major sectors that comprise the S&P 500 Index, which was up 9.59% for the period, according to Bloomberg. The top-performing sector was Information Technology, up 34.47%. 
  5. The consumer's growing acceptance of online shopping has been a big contributing factor to the strong performance of consumer discretionary stocks in 2020 (COVID-19), in our opinion. Ecommerce sales are expected to reach $794.50 billion this year, up 32.4% year-over-year, according eMarketer. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Consumer Discretionary Index is an unmanaged index which includes the stocks in the consumer discretionary sector of the S&P 500 Index. The S&P 500 Index is a capitalization-weighted index comprised of 500 stocks used to measure large-cap U.S. stock market performance.

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Posted on Thursday, October 15, 2020 @ 1:31 PM • Post Link Share: 
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  A Global Snapshot Of Government Bond Yields
Posted Under: Bond Market

 
View from the Observation Deck  
  1. Today's blog post shows the yields on a couple of benchmark government bond maturities from key countries/economies around the globe.
  2. Investors need to be cognizant of the fact that interest rates are still at extremely low levels. As indicated in the table above, government bond yields have fallen notably year-to-date in a number of countries.  
  3. Due largely to the economic fallout from the COVID-19 pandemic, the yields on the 2- and 10-year U.S. Treasury-notes (T-notes) are down over 100 basis points year-to-date. Government bond yields in Canada have essentially mirrored the decline in U.S. yields.  
  4. The yield on the U.S. 10-year T-note closed at 0.77% on 10/12/20, 526 basis points below its historical average yield of 6.03% since 1/5/62, according to Bloomberg.
  5. Federal Reserve Chairman Jerome Powell has indicated that the Federal Reserve is prepared to keep short-term interest rates low for the next three years if need be to reach its unemployment and inflation targets. 
  6. As indicated in the table above, many countries still have negative-yielding sovereign debt trading in the market.
  7. As of 7/27/20, the total amount of negative-yielding debt was nearly $15 trillion worldwide, according to Bloomberg.
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Posted on Tuesday, October 13, 2020 @ 12:55 PM • Post Link Share: 
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  US Stock Markets Ended Oct. 9, 2020

 
The S&P 500 Index returned 3.89% last week, its best performance since the shortened holiday week ending July 2. October has shown a welcoming start for equity investors following a disappointing September. After recording an all-time closing high on September 2, the index slid over a three-week period posting a -3.80% return for the month, its first negative monthly performance since March. Equities opened up on Monday on news that President Trump was recovering from coronavirus symptoms and could be leaving the Walter Reed hospital later that evening. The positive trend was reversed Tuesday afternoon when President Trump tweeted he was stopping stimulus negotiations until after the election causing the index to decline over 2.00% in the last 75 minutes of trading. Stocks were headed back up on Wednesday on hopes that some stimulus could still occur as President Trump encouraged lawmakers to provide immediate approval of $25 billion for the airline industry, aid for small businesses, and $1,200 stimulus checks for jobless Americans, in contrast to the large comprehensive aid package of $2.2 trillion proposed by Speaker Nancy Pelosi. All sectors were positive last week with the top sectors being materials and energy which was helped by the rise in oil prices due to Hurricane Delta. Crude oil closed at $40.60 per barrel on Friday, climbing 9.58% for the week. Top energy names included Cabot Oil & Gas Corp, Halliburton Company, TechnipFMC PLC, and Occidental Petroleum Corp, and top materials names included Corteva Inc., Martin Marietta Materials Inc., LyondellBasel Industries NV, and PPG Industries Inc. Information technology company Xilinx Inc. posted the best performance in the index last week, returning 17.89%. The stock jumped Friday on news that Advanced Micro Devices Inc., also known as AMD, is in talks to acquire the smaller semiconductor company. Domino's Pizza Inc. posted the worst performance in the index last week, returning -9.87%. The stock dropped on Thursday after missing earnings estimates. Earnings announcements expected this week include Johnson & Johnson, UnitedHealth Group Inc., JPMorgan Chase & Company, Bank of America Corp, Honeywell International Inc., Wells Fargo & Company, and many others.
Posted on Monday, October 12, 2020 @ 8:16 AM • Post Link Share: 
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  US Economy and Credit Markets Ended Oct. 9, 2020
Posted Under: Weekly Market Commentary

 
U.S. government bond yields rose last week, with longer-term yields rising more than shorter-term yields, on hopes for fresh stimulus to boost the U.S. economy. Yields rose sharply on Monday but reversed on Tuesday after President Trump said he was postponing stimulus talks until after the election. On Friday, however, White House economic adviser Larry Kudlow said the president approved a revised $1.8 trillion stimulus proposal that would include aid for airlines and small businesses as well as funds for direct checks. In economic data, initial jobless claims for the week ended October 3rd were 840,000, which was above expectations. Weekly jobless claims have recovered significantly since spring but have remained between 800 and 900 thousand since August, a level that is still above the pre-pandemic high of 695,000. The September ISM Services Index beat expectations, however, showing growth in the services sector for the fourth consecutive month following two months of contraction in April and May. Major economic reports (related consensus forecasts, prior data) for the upcoming week include Tuesday: September CPI MoM (0.2%, 0.4%); Wednesday: October 9 MBA Mortgage Applications (N/A, 4.6%), September PPI Final Demand MoM (0.2%, 0.3%); Thursday: October 10 Initial Jobless Claims (825k, 840k), October Empire Manufacturing (14.0, 17.0); Friday: October Preliminary U. of Mich. Sentiment (80.5, 80.4), September Retail Sales Advance MoM (0.8%, 0.6%), September Industrial Production MoM (0.6%, 0.4%).
Posted on Monday, October 12, 2020 @ 8:15 AM • Post Link Share: 
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  Many Investors Could Be Underweight U.S. Mid- & Small-Cap Stocks
Posted Under: Conceptual Investing

 
View from the Observation Deck  
  1. Today's blog post focuses on equity asset allocation via market capitalization (cap). In other words, how much capital do investors commit to U.S. and foreign large-, mid- and small-cap stocks. We use mutual fund and exchange-traded fund (ETF) asset levels as a barometer.
  2. As indicated in the chart, as of 8/31/20, investors had positioned a combined $8.02 trillion in the three U.S. large-cap categories, while allocating just $1.08 trillion and $0.76 trillion, respectively, to the mid- and small-cap categories.
  3. Overall, of the $9.86 trillion allocated to these nine categories, 81% was in U.S. large-cap stock portfolios.
  4. As of 8/31/20, investors had positioned a combined $1.92 trillion in the three foreign large-cap categories featured in the chart, while allocating $1.09 trillion to the three small/mid categories.
  5. Overall, of the $3.01 trillion allocated to these nine categories, 64% was in foreign large-cap stock portfolios.
  6. With two exceptions, Mid-Cap Blend and Foreign Small/Mid Blend, investors have favored the blended portfolios, which have exposure to both growth and value stocks.
  7. The only style/market cap featured in the chart that had positive estimated net inflows year-to-date through 8/31/20 was Foreign Large Blend at $7.77 billion, according to Morningstar. 
  8. While risk tolerance is always an important factor in determining where to allocate investment capital, the fact that mutual fund and ETF investors have just 19% of their capital earmarked for U.S. stocks in mid- and small-caps is a bit surprising, in our opinion. At a 64%/36% split, however, investors appear to be employing more of a balanced approach to allocating capital in the foreign mutual funds and ETFs. 
  9. From 12/31/99 through 9/30/20, a period that captures this millennium, the S&P 500 Index posted an average annualized total return of 6.10% (242.28% Cumulative TR), compared to 8.66% (460.74% Cumulative TR) and 8.55% (449.43% Cumulative TR), respectively, for the S&P MidCap 400 and S&P SmallCap 600 Indices, according to Bloomberg. Both mid- and small-caps notably outperformed their large-cap counterpart. 
This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. There can be no assurance that any of the projections cited will occur. Past performance is no guarantee of future results. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P Small Cap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization. 

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Posted on Thursday, October 8, 2020 @ 1:39 PM • Post Link Share: 
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  The Only Constant Is Change
Posted Under: Sectors

 
View from the Observation Deck  
  1. One of the most common questions we field on an ongoing basis is the following: What are your favorite sectors?
  2. Sometimes the answer is more evident than at other times, in our opinion.
  3. You didn't need much of a crystal ball to tout Information Technology in 1998 and 1999 (top-performing S&P 500 sector both years by a wide margin), as was the case with Energy in 2004 & 2005, according to performance data from Bloomberg.
  4. From 2006-2019, however, no sector in the S&P 500 Index was able to repeat as the top-performer on a calendar year basis.
  5. The three top-performing sectors in Q3'20 were as follows (total returns): 15.06% (Consumer Discretionary), 13.31% (Materials) and 12.47% (Industrials). The total return on the S&P 500 Index was 8.93%. The other eight sectors generated total returns ranging from -19.72% (Energy) to 11.95% (Information Technology).  
  6. Investors were net buyers of passive sector funds for the 12-month period ended 8/31/20, but net sellers of active sector funds. Sector Equity mutual funds and exchange-traded funds (ETFs) reported estimated net inflows totaling $18.97 billion ($34.92 billion/Passive vs. -$15.95 billion/Active), according to Morningstar.
  7. Fund flows to the Sector Equity category were strong in August 2020. Net inflows totaled an estimated $6.39 billion, according to Morningstar. 
  8. Click here to access the post featuring the top-performing sectors in Q4'18, Q1'19, Q2'19 and Q3'19. 

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.  

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Posted on Tuesday, October 6, 2020 @ 12:56 PM • Post Link Share: 
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
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• US Stock Markets Ended Oct. 2, 2020
• US Economy and Credit Markets Ended Oct. 2, 2020
• Top-Performing S&P 500 Index Subsectors In 2020
• A Snapshot Of Bond Valuations
• US Stock Markets Ended Sept. 25, 2020
• US Economy and Credit Markets Ended Sept. 25, 2020
• Sector Performance Via Market Capitalization (Year-to-Date)
• S&P 500 Index Dividend Payout Holding Up But Stock Buybacks Plunge
• US Stock Markets Ended Sept. 18, 2020
• US Economy and Credit Markets Ended Sept. 18, 2020
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