Capital Eyes

Industrial Production: Industrial output rose 0.4%, below economists’ expectations of a 1% increase.

Housing: Housing starts fell 5.1% after sharp gains in the previous three months. Single-family home starts increased by 4.1%, but the overall result was dragged down by a 22.7% decline in multi-family starts.

Existing home sales rose 2.4% from July and were 10.5% higher than August of last year.

Sales of new homes rose to their highest level in almost 14 years, posting a 4.8% increase from the previous month.

Consumer Price Index: Consumer prices jumped 0.4% in August, led by the sharpest increase in the cost of used cars and trucks in more than 50 years. On a yearover-year basis, inflation rose 1.3%.

Durable Goods Orders: For the fourth straight month, durable goods orders rose, increasing by 0.4% in August. New orders for nondefense capital goods, excluding aircraft, jumped 1.8%.

The Fed

The Federal Reserve signaled that interest rates would likely not increase until 2023 following its two-day Federal Open Market Committee (FOMC) meeting that ended on September 16. Fed officials also stressed the importance of additional fiscal stimulus.

Fed officials adjusted their outlook for unemployment, predicting it would average between 7 and 8% in the final three months of the year. Previously, Fed officials had expected unemployment of between 9 and 10% in the final calendar quarter of 2020.

MARKET INDEX

DJIA NASDAQ S&P 500

Y-T-D CHANGE

-2.65% 24.46% 4.09%

September 2020

-2.28% -5.16% -3.92%

BOND YIELD

10 YR TREASURY

Y-T-D

-1.24%

September 2020

0.69%

Sources: Yahoo Finance, September 30, 2020

Indices are unmanaged, do not incur fees or expenses, and cannot be invested into directly. These returns do not include dividends. 10-year Treasury real yield = projected return on investment, expressed as a percentage, on the U.S. government’s 10-year bond.

Despite Election Results, Either Administration Has Lots to Tackle

As press time Election Day was less than a week away. No matter who ends up winning the presidency, however, the administration and Congress will have to immediately address some critical issues after the election and in the first year. Below are some of those issues.

Appropriations/Budget The fiscal year ended on September 30, and spending bills for fiscal year 2021 have not yet been approved. Instead the current Congress and the president signed bills that cover spending through mid-December. Therefore, appropriations bills will have to be approved and signed into law in a lame duck session after the election. Failure to do so will result in a government shutdown right before the December holidays.

Depending upon what is approved in December, early in 2021, Congress and the administration will have to start working on spending bills for fiscal year 2022 and possibly another bill for the remainder of fiscal year 2021. However, the current funding caps that were put into place in 2011 will have expired, so there will no longer be mandatory caps on discretionary spending. If the GOP sweeps the elections, then we can expect that spending will be focused on a southern border wall and defense. If the Democrats sweep, then it is likely that spending priorities will be on health care and green energy initiatives.

Second, with no end in sight for the pandemic, the pressure for more spending relief will be at the forefront next year for whoever is president. This will become even more critical if another stimulus bill is not signed into law during the lame duck session.

Finally, the next president will have to deal with the issue of the trust fund depletion. It is estimated that Medicare funding will run out of money by 2024 and

Social Security funding by 2026. No matter who wins the election, there will be pressure on the Congress and president to figure out a solution to this problem— whether it be changes to both programs to make them more sustainable or a bailout.

Energy/Environment It will be critical that the next Administration tackle the extreme damage this year from a brutal year of natural disasters, such as wildfires, hurricanes, and floods. Cleanup from all these devastating disasters will be high on the agenda for 2021.

Transportation/Infrastructure There are three top issues in this category that must be addressed by the next administration. The first is the fact that the pandemic has decimated all modes of transportation industries. With the continuing COVID-19 crisis, these industries are depending on the federal government to help. The next president will have to implement a plan to keep these struggling industries from going under.

Second, the next administration will have to figure out a sustainable way to pay for highways, bridges, and transit whether by substantially raising the gas tax or finding a new way to pay for these critical structures.

Thirdly, while both candidates support an infrastructure initiative to repair our damaged transportation fixtures, the next president will have to present a clear plan for how to rebuild and how to pay for it.

In the End This is obviously a contentious election year, but we have to unite and work together in 2021 to overcome the many problems that arose during 2020. To quote the Queen of England, this has certainly been an