I cannot believe that I am starting this newsletter the same way as the last. I am again wishing everyone my best and hope that all are healthy and staying safe. I am not sure that this will be the last time I say this, but I am hopeful and that it will not happen many more times.
As always, I want to thank you all for being such great clients and friends. Let me also thank you all for trusting me with your hard-earned money and financial security, particularly in this trying time. Many of you have trusted me with new investments this year and to those that have helped me by providing referrals, a special thank you. That vote of confidence means so much to me.
As of this writing, the S&P 500 is almost back to even for the year even as parts of the country are having big surges in Coronavirus cases. Some of you have called expressing concern about the market and how it can keep going up. I will try to explain it. The stock market is a forward-looking indicator not backward. The virus has caused a tremendous recession but one that should be short lived and is not caused by the financial markets but by the Coronavirus.
In a former article that I created “What could the Stock Market Look Like after Coronavirus?” I discussed a lot of this. There is tremendous liquidity being introduced into the markets by the Federal Reserve Board and Stimulus from the Federal Government intended to bridge the time until a vaccine can be successfully created. I also mentioned that all this new money (over $6 trillion so far) must find a home to be invested and with low interest rates there is little competition, so stocks are moving higher. I recently read that over 100 companies worldwide are working on therapies and vaccines to cure the virus. The timetables for delivery of vaccines and other treatments are expected to be late 2020 or early 2021. Both the Federal Reserve and Government have committed to doing everything within their power to assist the consumer, businesses, and states.
The average consumer has increased their savings as they have received stimulus checks and while at home, cannot spend much. Our economy is about 70% consumer driven so this lends well to a resurgence of the economy on “the other side or the virus”. Consumer savings is at a high and growing which means there is plenty of liquidity available.
Often people make investment decisions based on emotion and that has proven in the past to be the worst thing that one can do. Some clients wanted to sell all when the market was near its bottom. I tried to encourage you not to sell. As I stated in the last newsletter, I follow the “Buffet Mantra, be fearful when others are greedy, and greedy when others are fearful.” and look for opportunities to invest in bear markets.
I also said in my last newsletter, the market would rise at some point and it has. While the S&P 500 is not at its all-time high, the Nasdaq is. I believe in growth-oriented sectors (technology, healthcare, etc.) over value-oriented investments (energy, financials, industrials, etc.) but it is important to understand that there is no guarantee that growth sectors will continue to outperform other sectors.
Thank you very much. I look forward to seeing you all soon and celebrating the end of Coronavirus.
The S&P 500 Index and NASDAQ Composite are unmanaged and cannot be directly invested into. Past performance is no guarantee of future results. Investing involves risk and the potential to lose principal.
Sector investments are subject to sector risks and non-diversification risks, which may result in performance fluctuations that are more extreme than fluctuations in the overall stock market.
This communication is meant to be general. It is not investment or financial advice or a specific recommendation of any kind. Opinions and forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results could differ materially from those anticipated. Please consult your financial advisor before making financial decisions. (07/20)