| Monday, September 21, 2020 Headlines 1. US markets in steep sell-off but crawl back at the close 2. Apple shares fall into bear market territory 3. Corrections inside secular bull markets 4. FANGMAN stocks in steep decline from recent highs 5. US household net worth surges Markets Closed
 Image courtesy GettyImages/Bruno Herdt Markets Today U.S. markets opened the day in a steep sell-off, adding onto last week's losses as volatility returned and soured investor sentiment. At their lows, major U.S. equity indexes were down 2% or more, scraping lows they hadn't seen since July. They rebounded somewhat by the close, but nearly every sector was hit hard in the sell-off, led by financials and energy stocks.
Bank stocks were severely punished by investors, which may have been made worse by a scathing report by the ICIJ detailing two decades of money laundering and corruption (more below).
Investors may also be reckoning with the fact that there might not be a new stimulus bill passed by Congress before the election. There was also a resurgence in new COVID-19 cases in Europe over the past week. In short, there was plenty to worry about. But investors have climbed walls of worry before — in fact, they've been doing it all year.
The late rally at the close means some investors still have an appetite for stocks — they just want them to be a little cheaper. Let's see if that sentiment persists now that the summer is over.  Chart courtesy Stocktwits PODCAST ALERT! The latest episode of The Investopedia Express is LIVE. On this week's podcast:
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Headlines:
 Corrections in Context The September sell off in stocks may be unsettling to many investors, but corrections inside of recoveries are pretty common. How you view this current 10% slide for the S&P 500 and the Nasdaq depends on whether you think we are in a secular bull market or a secular bear market.
A secular market is a market that is driven by forces that could be in place for many years like low interest rates and strong corporate earnings. Sound familiar?
We know we fell into and crawled out of the fastest cyclical bear market in history from mid-March to July. A cyclical bear market is one caused by economic or business conditions. In this case, the economy and businesses came to a grinding halt due to the pandemic.
The question is whether that was a bear market inside a secular bull market or the continuation of a broader secular downturn.  Chart courtesy Fidelity Investments The Consensus View Most market watchers think we are still in a secular bull market and will be for some time. The Fed told us last week to expect interest rates at or near zero until 2023 and corporate profits are starting to grow again.
If you believe that, then a 10%, or even a 30% drawdown inside a bull market is not unheard of. Jurrien Timmer of Fidelity Investment shared the chart above to put these drawdowns in perspective.  FANGMAN Corrected It didn't take long for Apple to go from making new record highs into a bear market, falling 20%. In fact, it took less than twenty days. Many market watchers thought the 5-for-1 stock split was the beginning of the unraveling, but it took a few days after that for the bottom to fall out.
Apple is not alone among the tech giants that have fallen on hard times. The FANGMAN stocks are all in a steep correction, falling 10% or more from recent highs. Many believe they were overvalued and still are, with more room to fall. That's entirely possible. But, as we mentioned on Friday, institutional investors finally put money to work in the stock market last week, and they are looking for yield. The FANGMANs have delivered that all year.  U.S. Household Net Worth Explodes Higher The rally for U.S. equities in the second quarter, the rise in personal savings, and the appreciation of home prices in some states, have put a charge into U.S. household net worth.
According to the Federal Reserve, U.S. household net worth rose by $7.6 trillion in the second quarter after falling by $6.5 trillion in the first quarter. That was by far the largest increase since the Fed started gathering that data in 1952. Of course, the decline in household wealth in the first quarter was also historic.
To be sure, the recovery has not been equally enjoyed. According to Gallup, around 45% of Americans don't own stocks, and one-third don't own homes.
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(charts courtesy YCharts)  Shares of online payment company PayPal jumped by nearly 4.5% today, one of the few stocks to make gains. Video game company Take-Two Interactive Software was also a rare winner, climbing over 4%.  Airline stocks, including Delta and Alaska, fell today following new information from the Centers for Disease Control (CDC) about how far COVID-19 can travel indoors. Shares of Illumina fell by over 8.5% after the biotech company announced its planned purchase price for its own spin-off firm, Grail: $8 billion. Word of the Day Secular MarketA secular market is a market that is driven by forces that could be in place for many years, causing the price of a particular investment or asset class to rise or fall over a long period. In a secular bull market, positive conditions such as low-interest rates and strong corporate earnings push stock prices higher. In a secular bear market, where flagging corporate earnings or stagnation in the economy leads to weak investors sentiment, stocks experience selling pressure over an extended period of time.  Today in History Sept. 21, 1931: The day after the Bank of England abandoned the gold standard, U.S. stocks tumbled. The Dow Jones Industrial Average plunged 6.2% to an intraday low of 104.79, and the New York Stock Exchange authorities debated closing the market. But NYSE President Richard Whitney insisted that the market should remain open, and the executives compromised by instituting a temporary ban on short-selling. By day's end, stocks had recovered almost all their lost ground, with the Dow closing at 110.83, down less than 1%. John Brooks, Once in Golconda: A True Drama of Wall Street 1920–1938 (Harper & Row, New York, 1969).
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Monday, September 21, 2020
Tumbling
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