Uncertainty From Presidential Race Drove Volatility In October – Equity Overview

U.S. equity prices zigzagged throughout October as uncertainty regarding the election and a second stimulus package largely drove volatility. Growth, momentum, and quality factors of the S&P 500 Index led markets higher until October when a reverse occurred, shifting focus back to higher-beta, more-volatile stocks. Analysts believe that election results may eventually deliver a fiscal stimulus program that could promote economic expansion and drive unemployment lower.

Global developed market equities declined in October as earnings proved to be a concern among companies throughout various industries. In the U.S., the S&P 500 Index set an all-time record for the largest percentage dropped ever in a week leading up to a presidential election. (Sources: Bloomberg, Standard & Poors)

Election Results May Affect Rates – Fixed Income Update

Interest rates climbed slightly higher in October, driven by the anticipation of eventual inflation and growing federal debt levels. The yield on the 10-year Treasury bond rose from 0.69% in September to 0.88% at the end of October. The rise in yield was the largest increase since June.

Election results are expected to have a meaningful impact on the direction of interest rates over the next few years. New stimulus program funds may contribute to rising rates as newly-issued government debt is employed to pay for enormous potential benefit payments. (Sources: U.S. Treasury, Federal Reserve)

Millennials Lagging Relative To Their Parents & Grandparents – Demographics

The Federal Reserve tracks and compiles data on individuals segmented by generational designations including Baby Boomers, the Silent Generation, Gen X, and Millennials. The resulting data reveals that the millennial generation, born between 1981 to 1996, is lagging other generations in terms of financial position. Fed data for the four generations indicates that millennials have accumulated nearly as much debt as Boomers and use the most consumer credit of all the generational groups. Millennials control just 4.6% of U.S. wealth, while they represent the largest segment of the U.S. workforce. Financial discipline and behaviors driving saving and investing are areas in which millennials may need to improve as a group in order to rectify this trend.

Sources: Federal Reserve Bank of St. Louis: Survey of Consumer Finances & Financial Accounts

Shifting Energy Trends – Consumer Energy Usage

COVID-19 significantly altered the way we consume energy, and decades of conventional wisdom regarding consumer behavior was been upended this year. For the first time since 1960, U.S. consumers have spent more on electricity than on gasoline, representing a dramatic shift in energy usage.

The shift is largely attributable to an enormous drop in driving, as millions of U.S. workers started working from home. Demand for gasoline dropped to the lowest levels since 1990, transferring demand to electricity, which has seen the largest usage spike in 20 years. The increased use of laptops, printers and other home office equipment significantly elevated home electricity consumption. Any additional stay-at-home mandates may further affect gasoline and electricity consumption as millions of workers adjust to working from home.

Sources: U.S. Energy Information Administration

How a Lower Credit Limit Affects Your Credit Score – Personal Finance

Millions of Americans had their credit scores adversely affected this year, as banks and other financial institutions sought to mitigate risk by reducing lines of credit and credit card charge limits. The result was a reduction in scores for millions of Americans even while many continue to manage their credit and payments successfully.

Lenders responded to the pandemic-related economic recession by decreasing credit limits on consumer accounts in order to mitigate risk of exposure to consumer credit defaults and avoid financial distress. Since many credit accounts carry a balance, the credit utilization ratio rose as the credit limit was reduced. This ratio is a critical component used by the three major credit reporting firms in determining a consumer’s credit score. As ratios rise due to a credit limit reduction, credit scores tend to drop. The higher the credit utilization ratio a consumer has, the greater the perceived risk for lenders.

Consumers are often surprised by lower credit scores, since lenders are not obligated to warn customers about a pending credit limit reduction, and may only do so once the reduction has been implemented.

In order to try to curtail the effects of a higher credit utilization ratio, consumers may contact their credit lenders directly and request a reinstatement of their prior credit limit. Additionally, simply paying down an existing balance may prevent a potential credit score drop.

Source: Federal Reserve