This is the third newsletter that will start with my best wishes and hope that all are healthy and staying safe.
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 pursuing your 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, October 8, 2020, the S&P 500 up about 5% for the year and about 5% off the high for the year (according to Yahoo Finance.com). The appears the economy has bounced back from its worst but there are questions about what will happen next with the coronavirus spiking again in many states. Thousands of restaurants have closed permanently. Many large retailers have declared bankruptcy and airlines and cruise lines are on life support. The winter will force people indoors which may cause a larger spike in Covid cases unless people are incredibly careful or a vaccine is approved soon. Many of you may be worrying about all this as well as an election that seems likely to be contested which will cause more uncertainty.
On the positive side, what can we look forward to? Well, the Fed keeps buying assets, providing liquidity and has committed to keeping interest rates low for at least 3 more years. That makes it hard to hold cash or invest in bonds due to low returns. The federal government continues to provide stimulus and there are at least 5 companies in late stages of vaccine development and there are therapies already approved and more being approved as we speak to help those that get the virus to recover. That is a hopeful development. It seems most of the new cases are among young people that are often asymptomatic. If the more vulnerable parts of our population stay cautious, we may be able to limit additional illnesses and fatalities.
Many people have called and are concerned about the elections. I do not want to discuss the candidates but want to provide some financial insight. If Trump wins, deregulation will probably continue, and taxes should remain low which should benefit companies and stock investments. If Biden wins, taxes will most likely go up and regulation may increase but the printing press called stimulus could go into overdrive. This is probably net neutral or okay for stock market investments. No matter who wins, there should be an infrastructure package passed that will lead to more government spending which is helpful to stock, jobs and the economy. I am not in favor of major shifts in my clients’ portfolios because timing the market is extremely hard to do. Moving to a slightly more cautious stance may be warranted due to the election which will likely cause uncertainty.
Now almost 6 months after the low point of the stock market in March 2020, we can say again that making investment decisions based on emotion is not the best way to manage your investments.
I still believe in growth-oriented sectors (technology, healthcare, etc.) over value-oriented investments (energy, financials, industrials, etc.) Technology and medicine developments have accelerated during the horrible virus and should remain the best opportunities for earnings and revenue growth. In addition, with low interest rates, technology and growth are favored as borrowing is cheap and easy to attain.
In my opinion, the US has the best combination of economic factors, fiscal policy and opportunity for company growth in the world. My investments remain largely US bound. With interest rates near historic lows, I am keeping bond holdings to those that are highly rated and limited in term.
Thank you very much. I look forward to seeing you all soon and celebrating the end of Coronavirus.
The S&P 500 Index is 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.
(10/20)