Market Brief – 2020 Mid-Year Review

Market Brief 2020 Mid-Year Review

Dog days of summer have arrived. For 2020, it feels like the dog days arrived in March. From the moment the pandemic began to spread, to stay-at-home orders, to lock-downs, to protest rallies, to reopening phases, and back to more restrictions… what a year, and we are only halfway home. Didn’t even mentions the murder hornets! Let’s take a minute to catch our breath and see where we have been, where we are, and where we will go. Currently, we are in the midst of earnings season. Big name stocks will report second quarter earnings this week. Last week the main indexes finished mixed. The Dow up 2.3%, S&P up 1.25%, and Nasdaq down 1.1%. The S&P 500 outperformed the Nasdaq index by the widest margin since February 2016. The markets were mainly buoyed by progress of a virus vaccine.

What Happened?

The year started off strong through mid-February. Early cases and the fast spread of the coronavirus took hold in Asia and quickly jumped country borders to become a worldwide pandemic. Just about a month from the market peak in February came the market lows in March, a 33.9% drop for the S&P index. In just a few weeks, the U.S. economy erased 7 years of employment gains. 30 million Americans lost jobs, driving unemployment as high as 22% in April. By June, the unemployment rate hovered around 14%. Still extremely high, but significantly lower from 2 months prior.

In March, the Fed stepped in and provided a backstop to the equity markets. Stabilizing and possibly adding turbo to the economy via stimulus for individuals and businesses. The pandemic accelerated tech disruption. It changed how companies reach consumers, how supply chains work, how to deal with remote employees, and still build their brands.

Where Are We Today?

Year-to-date index performance; Dow down 6.54%, S&P down 0.2%, and Nasdaq up 17.0% through the close on Friday. Last week, Treasury Secretary Mnuchin said the Trump administration and Senate leadership are discussing a new stimulus bill. The end of July is the target time frame as the previous stimulus benefits are ending. The housing market reports are exceeding expectation. Current metrics show a shortage of existing home inventory, limited housing labor to build new homes, and a shortage of entry level homes for the first time home buyer. Historically low mortgage rates help boost the housing demand. Labor income across the board is surging and consumer spending is rebounding.

The markets are in fairly good position today. Much of the strength is attributed to the Fed and swift implementation of monetary policy. With interest rates near zero, investors are willing to pay for future earnings. Growth stocks have done well, value stocks have lagged. When the economy improves and interest rates rise, growth stocks will be challenged by high valuations. Communities have begun to re-open. The U.S. seems to have chosen independence over lock-down. This has led to a recent uptick in coronavirus cases. Deaths due to the virus have decreased as health care has gotten smarter about how to handle symptomatic cases. The resurgence of hiring and end of mass layoffs indicate the job market is recovering. While the decreasing layoffs and increasing hires offer hope, the reopening process has been trending in the wrong direction.

Where Are We Going?

It’s election season. From here on out, politics will headline media reports. Snippets and quotes from leadership on both sides will sway the markets. Bigger than the election is the Fed’s actions. Interest rates are low and likely to remain low for a very long time. This creates a scenario of easy lending and the opportunity for trillions of dollars to remain invested in the market. The future months will measured by the resurgence of the coronavirus, how quickly a vaccine can be developed, another round of monetary stimulus, and the upcoming election. If you thought the first half of 2020 was a roller coaster, the second half might be just as wild! Take care and be safe.

Market Brief’s are taking a summer hiatus, see you at the end of August!

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Market Brief July 6, 2020

Market Brief July 6 2020

Welcome back after the holiday weekend. The markets welcomed us back with a big day today, all indexes were in the green! This positive trend is a continuation from the previous week. Last week all indexes finished up. The Dow up 3.3%, S&P 4.0%, and Nasdaq 4.6%. The markets had a short week due to the holiday observance on Friday. Virus cases continue to rise. The Fed remains extremely helpful. And election season is right around the corner.

Last Week

The markets shrugged off the rising Covid cases. The S&P 500, Dow, and Nasdaq all finished their best quarters in decades. Manufacturing data was better than expected. June payroll was released last Thursday morning, and the positive report sent stocks soaring. The report indicated that 4.8 million jobs were added in the month of June. The U.S. reported a daily record of 52,000 new cases in a 24-hour period. The Fed continues to pump money into the economy. Chances of another round of stimulus are high. And progress for a Covid vaccine get better each day.

The Week Ahead

The markets are in a historically bullish time frame, June 26-July 11. Historically, the market gains 6.3% over this time frame. If history repeats, the indexes could hit all-time highs. On the flip side, it is an election year. The markets tend to fall prior to the election. The beginning of earnings season could help buck the trend as quarterly reports will be released in mid-July.

The U.S. labor market has recouped nearly 1/3 of March and April job losses, but employment fractures linger. Initial jobless claims have provided one of the most current pictures of the state of the economy and have stayed stubbornly high. Continuing claims came in at 19 million last week, so many Americans are still receiving unemployment benefits. This suggest s that either the first wave of job losses continues, or businesses that have re-opened are beg inning to shutter. With the increase of Covid cases, another lock-down is not likely, but delayed progression is inevitable.

Year-to-date index performance; Dow down 9.5%, S&P down 3.1%, and Nasdaq up 13.8% through the close on Friday.

Have a great week. Stay cool and safe!

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Market Brief June 29, 2020

Market Brief June 29 2020

Summer is full swing and so is the heat! The markets continue to sweat up and down. Last week all indexes finished down. The Dow down 3.3%, S&P 2.8%, and Nasdaq 1.9%. The markets fell mid last week as virus cases rose. More states delayed or paused reopening plans. Some small businesses chose to close their own stores.

Last Week

The V-shaped economic recovery is being challenged. Virus cases rose over 30% in some states last week. 33 states showed increases in cases. States, such as Texas and Florida, closed bars and reduced restaurant capacity. Bank shares fell as the Fed ordered them to stop share buyback programs and dividend payouts. The global economy shows signs of recovery based on PMI economic reports. The indexes fell for the second weekly loss in the past three weeks.

The Week Ahead

The markets are closed on Friday in observance of Independence Day holiday. Jobs data being released on Thursday morning will headline the reporting week. Pending home sales in May were expected to increase 18%, and the reading came in at 44.3% for May! That is good news for the economy. In fact, the coronavirus contraction could end up being the shortest U.S. recession ever. And the recession may already be over. Despite the worst part potentially behind us, recovery will take a long time. During 10 recessions since 1950, it took an average of 30 months for the lost jobs to finally return. Not to mention, the two previous recoveries took longer, 4 and 6 years respectively. Many more jobs were lost from the virus, so the rebound might be here now, but full recovery may take much longer.

To put the recession behind us two points are in focus. The first, improving health situation. Second, continued federal government support. The latter picture is more clear. The former, not so much. Federal unemployment benefits expire at the end of July. However, with the recent rise in cases, renewing these benefit programs may be a reality. Current discussion for another round of stimulus includes $1.5 trillion package. At the end of the day, the markets continue to worry about another outbreak. Year-to-date index performance; Dow down 12.3%, S&P down 6.8%, and Nasdaq up 8.74% through the close on Friday.

Have a fun and safe 4th of July holiday!

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Market Brief June 8 2020

Market Brief June 8 2020

Despite protests, ongoing pandemic, and fresh trade war barbs with China, the stock market rally continues. Positive news regarding a vaccine, European stimulus, and better than expected unemployment reports spurred the market. Indexes were up across the board, the Dow up 6.8%, S&P up 4.9%, and the Nasdaq 3.4% on the week.

This Past Week

The recession that started in March is the sharpest downturn since the Great Depression. As it turns out, it was also the shortest. This does not mean the US is fully recovered, or even close; a full recovery is going to take at least a few years. But look for more positive numbers from here on out, including next week’s reports on retail sales, industrial production, and home building. Friday’s employment report should leave little doubt that the US economy has already hit bottom and is starting to recover.

Meanwhile, initial jobless claims fell for the ninth consecutive week, and continuing claims remain below the peak hit in the week ending May 9, both consistent with an economy that is already hit bottom. The May jobs report unexpectedly showed a net 2.5 million jobs returned to the labor market and the unemployment rate dropped to 13.3% versus rising to consensus 19.4%.

The Week Ahead

Wednesday’s Federal Reserve’s monetary policy statement and economic projections is the week’s key risk event. One data point does not define a trend, so Friday’s blockbuster employment report is unlikely to materially change their somber economic outlook. Wednesday and Thursday’s CPI and
PPI reports offer updates on U.S. inflation.

Profits will be down substantially in the second quarter, but should recover strongly in the several quarters thereafter. No one knows for sure what the second half will bring, much less 2021 and beyond. But we think that, like in the past, those who have faith in the future will be rewarded. Year-to-date index performance; Dow down 5.0%, S&P down 1.1%, and Nasdaq up 9.4%.

Have a safe week!

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Market Brief June 1 2020

Market Brief June 1 2020

Optimism regarding the re-opening process is getting stronger. Indices finished the month of May up 4-6%. Unemployment continues to grow. Economic reports, as expected, are not good.

This Past Week

The markets finished with the best 2-month gain since April 2009. Equities moved higher for the week as economic activity starts to improve. More states and businesses continue to reopen. On Thursday, China passed a National Security Law that jeopardizes Hong Kong’s autonomy. These increased tensions may lead to Hong Kong losing their special trading status with the United States. Initial Jobless Claims came in at 2.12M. Continuing Claims reported 21.1M are compared to estimates of 25.7M. Indexes have risen 36.06% from the lows in March.

Week Ahead

As far as employment is concerned, losses have reached levels not seen since the 1930s. Social unrest reflects the 1960s, and city-wide curfews are expected. U.S./China continue to offer headlines news. The focus this week will be on the May jobs and U.S. manufacturing reports. If the job report figures are less than 8 million, this is positive for the economy.

From a technical viewpoint of the markets, investors may be in a good position. TDAmeritrade research released the following statement, “95% of stocks in the S&P500 are trading above their 50-day moving average. Higher than any point since at least 2003. Near-term breadth remains robust. Historically, when this metric exceeds 90% for the first time, it is a statistically significant event. Pointing towards potentially strong equity performance ahead.” Good news for investors.

Looking ahead, the path of reopening different states, and tensions between China and the U.S. will be closely watched by investors. Watch next week’s unemployment report closely, predicted to show a 19.6% jobless rate. The rally in stocks, could continue as markets tend to start to ratchet higher after data starts to bottom. Year-to-date index performance; Dow down 11.1%, S&P down 5.8%, and Nasdaq up 5.8%.

Have a safe week!

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Market Brief May 26 2020

Market Brief May 26 2020

The indexes all finished higher last week on the hopes of Moderna reporting a promising phase 1 of the Covid vaccine. Fed Chairman Powell also said the Fed has more tools to support the economy. Markets fell on news of renewed tension with China. The Dow, S&P, and Nasdaq indexes all finished up last week Dow up 3.3%, S&P 3.2%, and Nasdaq 3.4%. Dow’s biggest week since April 9.

Last Week

The U.S. death toll passed 95,000. Cases passed 1.5 million. Despite the rising cases, more states re-opened. Another 2.4 million applied for unemployment claims last week. Again, it is bad news, but not as bad as the prior week. Which means improvement, and closer to a state of recovery. Typically, the average level of initial claims for a month peaks two months before the economy hits bottom. April looks like it was the highest month for initial claims, which signals an economic bottom should come in June. Millions fell behind on their mortgages.

Air traffic is up. The number of passengers passing through TSA checkpoints rose to 267,451 this past Sunday, versus a Sunday low of 90,510 on April 12, a near tripling of passenger activity. Yes, this past Sunday was a holiday weekend, but last Sunday (May 17) was already up 180% from the low. And in Congress, the House passed another stimulus bill, which the Senate shut down. Long story short, we still do not know what the future holds. Economic reporting is ugly, earnings reports are awful, and there is no forward guidance to stand on.

Week Ahead

Holiday shortened week, but plenty of economic reports to give insight into the strength of recovery. Along with continued weekly jobless claims, April new home sales reports and mortgage applications.

The recession started in March and is the deepest since the Great Depression. However, it may also be the shortest. A full recovery is a long way off. We won’t see the level of real GDP we had in late 2019 again until late 2021. We might not see an unemployment rate below 4.0% until 2024. With every passing day, the lockdowns take an increasing toll; the sooner they end, the better. Year-to-date index performance; Dow down 14.3%, S&P down 8.5%, and Nasdaq up 4.0%.

Have a safe week!

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Market Brief May 18 2020

Market Brief May 18 2020

Fed Chair Powell reiterated the committee’s outlook for the economy was highly uncertain and that unemployment may peak in the coming month. Another 2.9 million Americans filed for unemployment benefits, bringing the 8-week total to nearly 37 million. The bright side, continuing claims ‘only’ rose to 22.8 million from 22.4 million. This is another week of increasing claims at a decreasing rate. The markets all finished down for the week. It was the Dow and Nasdaq’s worst week since week ended April 3, and the S&P 500’s worst week since March 20.

Last Week

Volatility rose last week as confidence in the recovery and re-openings went back and forth. With some parts of the country slowly opening, there are glimmers of hope. Consumer confidence, measured by the University of Michigan, rose slightly in the May preliminary reading. Mortgage applications rose for the fourth straight week. Refinancing slowed, but it is still up 200% compared to the previous year, spurred by low interest rates.

At the same time, U.S and China are back at each other. The Trump administration ordered the federal employee retirement fund not to invest in Chinese companies. Specifically, companies that could be sanctioned for actions supporting the spread of the coronavirus. The unemployment total for the last two months has now reached 36.5 million Americans. For the week, the Dow fell 2.7%, the S&P 500 fell 2.3%, and the Nasdaq fell 1.2%.

This Week

As the economy goes through an unsynchronized reopening process, it seems apparent that any decline in unemployment is unlikely to match the pace of its ascent higher. Economists are projecting the U.S. economy to contract at 6.6% this year. The previous estimate was a contraction of 4.9%. The high unemployment, coupled with declining consumption and a fresh spat between U.S./China keeps everything on the rocks.

Politically, lawmakers are weighing a fresh stimulus. The House passed the $3 trillion spending plan. On the data watch, U.S. building permits will be released on Tuesday. This gauge indicates housing activity as some states edge back to “normal”. Thursday, weekly unemployment claims will be released, and Fed Chair Powell speaks. Wall Street investors will be very tuned into what he has to say.

Year-to-date index performance; Dow down 17.0%, S&P down 11.4%, and Nasdaq up 0.5%.

Have a fun and safe Halloween week!

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Market Brief May 11 2020

Market Brief May 11 2020

The markets finished up last week. Surprising to some investors as the unemployment numbers for April hit a record setting 20 million. This equates to an unemployment figure of 14.7%! To put the job loss in perspective, from October 2010 to February 2020, the economy added 22.1 million jobs. Last Thursday, 3.1m former workers filed for unemployment benefits. However, it was the 5th straight week when the number of applicants fell. For some, this is a signal of improvement. This also may point to the fact that the worst is behind us. The forward looking market is ready for a turnaround.

Last Week

States are re-opening and sharing their blueprints with others to follow. Companies reporting earnings last week continued to withdraw guidance. Companies are sharing less than optimistic commentary. Economic reports have met the ugly reality, but have not exceeded those benchmarks. This has helped prop up the markets for now. Along with positive news regarding potential vaccine for Covid. The Dow, S&P, and Nasdaq indexes all finished up last week – Dow up 2.6%, S&P 3.5%, and Nasdaq 6.0%.

During the earnings came the release of dividend status. The number of dividends increased in April totaled 19, down from 30 a year ago. Year-to-date, dividend increases totaled 144, down from 148 over the same period a year ago. Twelve dividends were cut in April, compared to one cut a year ago. Twelve dividends were suspended in April, bringing the total to 22 for 2020. This is a sign of uncertainty and caution among companies. Instead of paying a dividend, these companies are raising cash on hand, paying down debt, or using for day-to-day operating expenses until “normal” returns.

Week Ahead

Investors are currently looking at the bright side and trying to figure out when normal is back. Closely watching how states are re-opening and if Covid cases begin to increase in those states. The retail sales report on Friday will tell us one of two things. Is the consumer completely locked down, including their wallets? Or, has the quarantine led to regular or even higher spending with people sitting around their house all day? Other economic news, CPI and PPI will both be released next week as investors digest the impact of the slowdown on both the economy and the stock market.

Continued U.S. and China tension is back on the front burner. Similar to the back-and-forth in 2019, market swill ebb and flow with the latest tweet, response, and action taken by each side. Year-to-date index performance; Dow down -14.7%, S&P down -9.3%, and Nasdaq up 1.7%.

Have a safe week!

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Market Brief May 4, 2020

Market Brief May 4 2020

The markets are unsure. Strange to say it, but the markets do not know what to think of the current situation. The market makers are trying to figure out what happens next. Right now, we are sitting in no man’s land. The volatility has calmed down. Current volatility is less than half from the peak in March. Unemployment is through the roof. 30 million unemployment claims have been filed in the last 5 weeks. The Fed stepped in, like the knight in shining armor and made tremendous moves to help companies and individuals. However, we are not back to business as usual. And we do not have a definitive time frame to do so. And we still have people dying everyday and more are still contracting the virus.

Last Week

The markets went up as states slowing began allowing businesses to reopen. Better news came on Wednesday when the drug company Gilead, announced it’s drug met preliminary goals in a study. The end of the week was not as good. Thursday’s jobless claims piled on an already ridiculously high number. On Friday, news of the U.S. retaliating towards China sent the markets even lower heading into the weekend.

For the week, the Dow finished down 0.22%, S&P 500 down 0.21%, and the Nasdaq down 0.34%.

Looking Ahead

Focus will be on the states that reopened; Georgia, South Carolina, and Tennessee. If there is a spike in virus cases, restrictions may be imposed. If those states do not see a resurgence in virus cases, others might be encouraged to lift their restrictions sooner. The economic data is numbing. The has not been positive economic news as of late. Investors understand it is ugly, and the reports could get worse before improving.

Treasury Secretary Mnuchin has forecast a fall in 2nd-quarter growth, with a bounce back in July. For the year, the Dow is down 16.8%, S&P 500 down 12.4%, and Nasdaq down 4.1%.

Have a safe week!

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Market Brief April 27 2020

Market Brief April 27 2020

The markets snapped a 2-week win streak, falling slightly last week. As expected, the economic news was dismal. Unemployment numbers continue to rise. The five week total now exceeds 26 million. The virus continues to wreak havoc, claiming over 200,000 lives around the world, and over 50,000 in the United States. Markets slid as news reported that drug remdesivir, from Gilead Sciences, results were less than positive.

Global manufacturing data dropped on the lowest output, new orders, and employment numbers on record. The oil industry tanked early in the week as contracts were expiring, before recovering by weeks end. Oil’s roller coaster is attributable to low demands for oil, oversupply, and speculation of May crude oil. Low oil prices is great for everyone, except, nobody can go anywhere! So the relief at the pump for unemployed individuals does not go as far as when there is full employment. U.S. home sales fell last week. Durable goods orders dropped over 14% in April.

Despite the efforts of further government stimulus, to aid small business and the overall unemployment picture, the indexes finished down. For the week ending 4/24, the Dow finished down 1.9%, S&P down 1.3%, and the Nasdaq down 0.2%.

The Week Ahead

Today starts a big week of corporate earnings, with 172 companies reporting. Notably the big tech names; Apple, Amazon, FaceBook, and Microsoft. According to FactSet, for the 24% of S&P 500 companies already reporting, the blended earnings decline for the first quarter is -15.8%.

Many companies have suspended their guidance. Thus far, 106 of the S&P 500 companies suspended 2020 guidance. That leaves investors with little to work off of. The companies dropping guidance are following the advice from the SEC. Instead, the calls are focused on the current assessment of the situation and how it affects their business right now.

The economic data paints a dismal picture. Continued focus will be on Thursday’s unemployment figure. Other data of interest this week include Mortgage Applications, Personal Income, and US Manufacturing. None of which will be a surprise, however, the data will provide clarity regarding just how bad. The key for investors is to focus on how quickly we are going to recover. This will depend on finding ways to carefully ease lockdowns. Also, how severe the Coronavirus will be in the months ahead and how quickly vaccines are made. Year-to-date, the Dow is down 16.7%, S&P down 12.2%, and the Nasdaq down 3.8%.

Have a safe week!

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Market Brief April 20 2020

Market Brief April 20 2020

The market rally continued. Finishing strong Friday due to a potential COVID-19 treatment. The Dow, S&P, and Nasdaq indexes all finished up last week. Dow up 2.2%, S&P 3.0%, and Nasdaq 6.1%. Not all was good as many banks reported earnings last week. The large banks are preparing for potential consumer and corporate loan defaults. Unemployment increases continue. In the last four weeks, 22 million Americans have filed for unemployment. This volume erases ten years of job growth. Retail Sales dropped in March and Industrial Production fell to the lowest level since 1946.

So why did the markets finish higher? Good question. The markets response was focused on two things. First, the potential vaccine treatment. If this treatment works or has a strong recovery rate, this is great news for the current time and the future. The markets want to be reassured if the virus returns there is a defense in place. Second, President Trump announced a plan to reopen states. Going back to “normal” is good for small business, consumers, and income earners. It is clear “life after virus” will be different, igniting the economy is certainly a positive for financial markets.

The Week Ahead

COVID-19 hospitalizations are declining in hotspot areas. Government officials are working on plans to gradually reopen their states. On Thursday, another round of unemployment claims is expected. Friday’s durable goods order report will shed light on business spending amid the health crisis.

Corporate earnings season continues. The focus of these calls remain to be the gauge of how negatively affected consumption and credit have been for both consumers and businesses. As well as, the prospects of doing business during the next few quarters. And lastly, for firms not on solid footing, investors will look to their liquidity as key indicator of strength going forward.

Year-to-date index performance; Dow down 15.0%, S&P down 11.0%, and Nasdaq up 3.6%. As the post image says, “Together We Do It” – Have a safe week!

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Market Brief April 13 2020

Market Brief April 13 2020

Looking for a job? So are the other 17 million that have lost their jobs in the last 3 weeks. COVID-19 confirmed cases passed 1.7 million, with almost 30% in the United States. And $62 billion was pulled from equity funds last week. Not to mention consumer sentiment fell to a 9 year low. So how did the markets finish the week before Easter? How about the best week since 1974! The Dow, S&P, and Nasdaq indexes all finished up last week. Dow up 12.7%, S&P 12.1%, and Nasdaq 10.6%.

The markets seem positive that the end is near. Stocks rally last week was mainly driven by the Federal Reserve action. Pumping $2.3 trillion in additional lending programs. The S&P 500 recorded the best week since October 1974. Why would the markets go up with all the bad news? Markets are forward looking. Pricing in all the information and looking through the mud ahead. Economist estimates for the second quarter are all over the board. All agree Q2 is in the tank. Q3 is where the predictions become less clear. Some believe a continued slowdown, while others expect a massive recovery. Hard to grasp to say the least.

The Week Ahead

Following updated COVID-19 updates will be oil and corporate earnings headlining the week. All economic data is basically factored in and the attention moves to the individual companies performance and expectation. How bad was Q1? What will happen in Q2? What changes were made to adjust to quarantine life? When can employees work full-time again? Bank reporting is heavy this week, led by JP Morgan, Wells Fargo, and Bank of America.

Unemployment numbers on Thursday will be watched closely. Two other economic reports worth noting are the Retail Sales on Wednesday and U.S. Building Permits on Thursday. These report will be for the month of March. Both expected to be ugly. Year-to-date index performance; Dow down 16.9%, S&P down 13.6%, and Nasdaq down 9.1%.

Have a safe week!

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Market Brief April 6 2020

Market Brief April 6 2020

With each passing day, we hope to be one day closer to the end of this ugly virus. Until that day arrives, continue the social distancing and best hygiene habits. The news ahead regarding the economic state and corporate guidance are likely going to be dismal. Economic numbers outside of jobs report will tell one tale. Company reports during earnings calls will tell another. This past week, unemployment rate jumped to 4.4%, from lows of 3.5%. Weekly unemployment claims surged north of 10,000,000 over the last two weeks. If you have a job, be thankful. The monthly employment numbers are usually the most important. They providing the first, in-depth perspective of the U.S. economy.

The most attention during the week is the weekly job report that comes out each Thursday morning. All eyes again will be watching very closely. Economists ahead of this downward spiral are predicting unemployment to reach as high as 17%! A depressing reality to think about. Jim Reid, a strategist for Deutsche Bank, stated “the contraction from the coronavirus this year is likely to rank among the 10 worst for many countries… that’s remarkable, given the size of the monetary and fiscal stimulus that governments have provided.”

What’s Ahead

The Dow, S&P, and Nasdaq indexes all finished down last week. Dow dropped 2.7%, S&P fell 2.1%, and Nasdaq down 1.7%. The Dow finished the first quarter, which ended last Tuesday, down 23%. The week ahead is mixed with important economic data, as well as, a couple corporate reports worth reading.

Tomorrow, Levi Strauss reports quarterly results. Usually, not a widely followed report, but given the impact of incomes and jobs, the report will provide impact on discretionary spending. On Wednesday, Costco Wholesale reports sales data for March. Another indication of recent spending impact since the virus began hitting U.S. and lock downs began mid-month of this report. Thursday reports include the Producer Price Index, a measure of inflation. Followed by the weekly job report, which comes after a week of 6.6 million claims. Friday reports also include the Consumer Price Index to see the impact of mainly retail prices for consumers in March. Friday the equity markets are closed in observance of Good Friday.

Year-to-date index performance; Dow down 26.2%, S&P down 22.9%, and Nasdaq up 17.8%.

Quarantine continues – have a fun and safe week!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief March 30 2020

Tiger King Market Update

Yes, Tiger King fans, this post is for you. Since the Tiger King rage went viral last week, the market has also hit record setting performance days! Is it safe to say Joe Exotic should be the next Fed Chairman? It’s not a bear market, not a bull market, but a Tiger market! I’m all in … to the show, not stocks…

OK, time to get serious. Market dip to market rip! The Dow soared by 21% over a 3-day span, closing up 12.77% for the week. The largest 3-day gain since October 8, 1931, during the Great Depression. The Dow’s weekly finish was the best weekly gain since 1938, despite losing 4% on Friday. The S&P and Nasdaq indexes also finished up for the week, 10.26% and 9.05%, respectively. The indexes ignored the record weekly unemployment claims of 3.28 million! A record setting number in it’s own right. The U.S. also passed China last week with the number of virus infection cases. The saving grace for markets last week was the announced $2.2 trillion relief plan.

Despite the market bounce that began last Tuesday and continued today, large and fast rallies are frequent characteristics of longer-term bearish periods in the market. The eventual recovery from this public health crisis will be gradual, similar to the financial crisis recovery. The recovery is still unknown, and according to Dr. Anthony Fauci, “the virus makes the timeline,” and that will probably determine the markets recovery as well.

The Bailout

Stimulus, bailout, virus relief, The CARES act, whatever you want to call, came to the rescue at the end of last week. The fiscal policy pumps trillions into the economy, aimed at providing liquidity to households and businesses. These include IRS checks, a major expansion in unemployment benefits, as well as a broad combination of grants, loans, and loan guarantees for businesses (large and small), hospitals, schools, and state and local governments. This stimulus is designed to buffer the economy in the short-term, as the virus hit the hard and fast across the country. Long-term the effects may linger for some time. The upcoming quarterly earnings season will provide investors better guidance on how hard companies have been hit.

The Week Ahead

Policymakers’ huge support has helped stabilize risk, but long-term market stability and declining volatility hinges on the apex of coronavirus infections being in the rear-view mirror. Economic reports for the week include a slew of data including manufacturing and employment. This week’s focus will be on the jobless claims number, showing a more clear picture of the economic state.

Year-to-date index performance; Dow down 24.2%, S&P down 20.96%, and Nasdaq down 16.4%. Volatility remains high and historically market rallies come back after volatility drops to normal range.

Have a safe week and remember to go for a walk outside (after finishing the Tiger King season on Netflix)!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief March 23 2020

Market Brief March 23 2020

Last week was the worst week the stock markets have seen since 2008. Continued developments of the coronavirus dominated the news, as the number of cases in the U.S. surpassed 15,000. This news left the indexes in a downward free fall. The three major indexes all finished down between 14-17% for the week ending March 20. The increase in cases is also getting the attention of life insurance, as I wrote about last week and you can read it here. Forget gold and oil as great market hedges, the future is now in toilet paper and hand sanitizer! (Just kidding).

To no surprise, economic data last week disappointed. China sales and industrial production was down double digits compared to last year. German economic sentiment also fell to the lowest on record. The lone bright spot from last week, was U.S. sales. For the month of February, U.S. retail sales came in 4.35% higher compared to last year. New home sales dropped for the month, while existing home sales jumped 6.5%. The existing home sales grew to the highest level since 2007, proving the real estate market was on solid ground prior to the virus outbreak.

The Week Ahead

The week ahead will be focused on stimulus news in the U.S., as well as, the flattening of the coronavirus infection curve. Wednesday’s durable goods order report is expected to be positive. However, this could be the last positive report we see for awhile, as business and productivity slows during the state ordered or self-mandated quarantine phases. Thursday’s unemployment claim report will likely soar, as businesses cut staff and hours for workers.

Big Picture and Recovery

Year-to-date index performance; Dow down 32.81%, S&P down 28.66%, and Nasdaq down 23.3%. According to Wilshire, this is approximately $12 trillion of wealth that has evaporated. Due to the recent domestic productivity halt, most banks have cut 2nd Quarter growth outlooks significantly. Goldman Sachs has revised their 2nd Quarter outlook to -24%, while J.P. Morgan cut their outlook to -14%.

The consensus for recovery is based on three outcomes. First, how quickly will the virus be contained. Second, whether businesses will have access to enough liquidity, or capital, over the next 90-180 days. And lastly, whether the fiscal stimulus can stabilize growth forecasts. Until then, volatility looks to remain high and sensitive to the latest news stemming from the virus developments and economic impacts.

Keep your distance, share the TP, and continue to wash your hands this week!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief March 16 2020

Market Brief March 16 2020

Not sure where to start today? Every post seems to be outdated the minute it is published! Whether a virus update, Fed decision, a political speech, geo-political affairs, or another stock industry takes a dive downward. Volatility remains high, driving the big daily swings in the stock market.

Last week, President Trump initiated a travel ban and events across the country ceased immediately. Last night, the Fed stepped in with another rate cut. The reaction from the market was one of fear, driving indexes lower, and initiating the third trading halt in the last month to start the week. Despite the historic big rally on Friday, all indexes finished the week down. The Dow dropped 10.46%, the S&P 500 fell 8.86%, and the Nasdaq dropped 8.18%.

The Week Ahead

The week ahead includes Retail Sales, Industrial Production, and Housing Start data. There reports will provide a gauge of the consumer and business sentiment during this time of uncertainty. The mortgage rate drops may act as a tailwind for home buyers and those refinancing, in the near term, but the prevailing headwind of the coronavirus economic disruption remains front and center. Coronavirus focus will be on the growth of new cases, as well as, policies designed to identify and subdue the outbreak.

Big Picture

Year-to-date index performance; Dow down 18.7%, S&P down 16.0%, and Nasdaq down 12.2%. The media is publishing a lot of information regarding corrections, bear markets, and recessions. Let’s break those down. A correction is typically considered when the stock indexes drop 10% from the recent highs. A bear market typically is defined by a drop of 20% from recent highs. And a recession is 2 or more consecutive quarters of declining GDP growth. Our current economic state may be a recession, however, we will not know until the quarterly numbers are published after Q2 2020 is over. Yes, the markets corrected more than 20% from the highs on February 19, therefore, indexes are in bear market territory. Turnaround signs remain high correlated to virus improvement. The slowing of new cases, the decline of deaths, and the increasing number of recoveries. Until then, volatility remains here to stay. Corporate guidance up to this point is hard to judge. The next round of corporate earnings will be very important regarding the impact of the virus disruption and growth prospects going forward. Market volatility is inevitable when investing in the stock market.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Update March 11 2020

Market Update March 11 2020

In light of sustained volatility in the markets, another market update is warranted. This is courtesy of one of our portfolio managers. Contact us directly for a portfolio review and discussion on how to manage risk during times of uncertainty.
 
A few of the main drivers of market volatility are laid out below.  If you have any questions about these items or the markets in general, please do not hesitate to reach out.
 
Oil Price War
Over the past week, negotiations between OPEC nations have taken place amid a backdrop of persistently low oil prices. The expectation going into last Friday’s final round of discussions was for a cut of between 750k to 1.5mm barrels per day of production. These cuts in production would have lowered the supply of global oil with the intent of sending prices higher.  But in the final hours of Friday’s session, Russia withdrew from the proposed deal, and the OPEC meeting concluded without any production cuts. 
 
On Sunday afternoon, news broke that the Saudis would open the taps and flood the market with cheap crude. This action has long been the ‘big stick’ that Saudi Arabia has wielded over other petroleum exporting countries, but this is the first time in decades that they’ve acted with such force. Oil prices dropped by as much as 35% Sunday night. Oil industry experts are still working through the numbers on how long the Saudis and Russians can stand to be engaged in a price war. But regardless of that conclusion, the price reaction has been swift. 
 
Traditionally lower oil prices have been met with cheers by consumers as prices at the pump plummet. But the shale revolution over the past ten years has more closely intertwined our economy with the price of oil. The most recent example of this was the 2015/2016 decline in oil prices that froze capital spending and forced many lower quality oil companies to fold.  A repeat of that experience during the Coronavirus growth scare would be very unfortunate timing.
 
Coronavirus & The Economy
As expected, the reporting on the economic and social impact of the Coronavirus remains fevered. While the infections and death totals are continuing to rise at a steady rate globally, the negative impact on macroeconomic data and individual companies remains a mystery. Since our last client update, the Federal Reserve has cut interest rates by 0.50% in an effort to stabilize markets and reignite demand for debt.
 
In the coming weeks, our Fed, as well as other central banks, will likely be forced into providing even more monetary accommodation. So far, fiscal authorities (Legislative & Executive branches) have been conspicuously absent from the debate on how to stem the negative economic impact. Both think tanks and market participants have drafted plenty of creative plans, but until the Administration/Congress begins to address the potential negative impact of this growth scare proactively, business confidence is likely to be fickle.

As we mentioned in our previous Coronavirus update, I’m sure you’re all finding plenty of Coronavirus coverage in your daily life.  But if you’re interested, we have plenty more material for discussion that we’d be happy to present at your convenience.
 
Intraday Limits and Trading Halts
If you paid close attention to the market action Monday, you likely heard/read some discussion of the limit-down trading halt. A trading halt refers to a set period in the day where no buying or selling can occur. For individual stocks, trading halts are relatively normal and happen daily.  Individual shares are typically halted because a significant news item is due to be announced during market hours. They also occur if a stock has moved sharply (higher or lower). Market-wide halts, on the other hand, are quite rare and occur when the S&P 500 has declined or advanced by a set percentage. In a market-wide halt, trading in all stocks and exchange-traded funds is halted for 15 minutes. Whether it is for the market as a whole or an individual stock, the logic behind a halt is to arrest any panic/euphoria and allow participants to reassess the market momentum. 
 
As always, we are working diligently to stay on top of the news cycle. We began this period of market tumult very well positioned but remain at the ready should we need to make further adjustments.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief March 9 2020

Market Brief March 9 2020

The post today is to continue combating the chaos being reported. Markets dropped dramatically this morning as uncertainty around Coronavirus continues. Headlines I read this morning included Italy instituting the death penalty for buying surgical masks, fining people for leaving their houses, releasing 50,000 inmates from prison, USA having higher mortality rates than elsewhere in the world, new cases continuing to surge and spread to 100 countries, etc etc etc. I nearly found myself getting caught up in the concern. So, I started evaluating our portfolio positions, diversification, and performance. The results are quite helpful so I wanted to share.

The Market and Portfolio Allocation

From October to December 2018, the S&P 500 experienced a 17.51% drop. This time frame and index is being cited on the news as a comparison. As of right now the S&P 500 has experienced a total loss of 17.32% from the market high on Feb 19th. Although this drop occurred over a shorter period of time, this volatility is nothing new to those of us in the industry, but it also isn’t anything new to YOU. Majority of readers have been clients since Oct 2018, and many of you were uncomfortable, but really didn’t feel the weight of a 17.51% drop in the S&P 500 index.

This probably feels more substantial because of the constant bombardment of updates, but it has not been yet. We probably will get to the point where that will change, but remember that we are not investing in the S&P 500 index alone. The index is comprised of 505 (not a typo) large market cap U.S. domiciled companies, many of which are technology based. We are investing in many many more than 500 companies, we are investing in many different countries, we are investing in many different sectors, and we are investing in many different market cap sizes. As a result, our portfolios have continued to experience smaller losses than the S&P 500 alone. This is a very important piece of our overall strategy.

What is your plan? Volatility spikes, large selling occurs, and uncertainty is prevalent in the market and economy, schedule a call today. Let’s talk and determine how we can help you be prepared.

The Week Ahead

With that said, the market shockingly finished positive last week! As of close on Friday, the Dow finished up 1.8%, S&P 500 up 0.6%, and Nasdaq up 0.1% for the week. The Dow’s jump last Monday was the highest single day gain in the Dow history, finishing up 5.1%. This quickly evaporated due to the Fed’s actions of cutting interest rates 0.5% on Tuesday. The “Biden Bounce” lifted stock markets on Wednesday. The Coronavirus fears dominated headlines Thursday and Friday as cases in the U.S. increased.

Weaker economic data seems inevitable. Entities globally are taking cautionary steps to slow the virus and companies continue to lower guidance. The virus concerns overshadowed strong economic data last week from the non-manufacturing ISM and the February non-farm job reports. Unemployment rate dropped to 3.5%, mortgage applications and refinance activity surged.

The week ahead will duplicate last week. All eyes on the virus and reports of decline/improvement in cases around the world. On Saturday, the oil price war increased, as Saudi Arabia announced the largest price cuts in nearly 20 years. Oversupply of oil while demand is low? Complete opposite of Economics 101.

Year-to-date index performance through Friday, March 6; Dow down 9.37%, S&P down 8.00%, and Nasdaq down %.

Have a great week and keep your seat belt buckled!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief March 2, 2020

Market Brief March 2, 2020

Eight trading days ago the markets were at record highs, now the market is down 12.8% on the year to start the week. Today was certainly different than last week. The three major indexes all finished up over 4% on the day! That is not a typo!! For last week, the Dow finished down 12.4%, the S&P lost 11.5%, and the Nasdaq finished down 10.5%. Volatile indeed. The leading driver of the market fluctuation is the impact or fear effect of the coronavirus. There is no indication of how far the virus will spread, or when it will be curbed.

The Fed’s perspective. On Friday afternoon, the Fed released a statement as follows, “The fundamentals of the U.S. economy remain strong. However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.” What does this mean? Good question, basically a non-committal stance from the Fed to lower rates in order to restore order in the economy. A “wait-and-see” approach to how effects will shake out over the next few months. A rate cut does not cure the virus, obviously, but creates a wealth effect to spur consumer spending.

Research from Vanguard pointed to an interesting report looking at the historical rebound following days when the S&P 500 fell over 3.5%. The results stated, that following 45 of the total 55 days when the S&P 500 fell over 3.5%, their S&P index fund was up an average of 20% a year later. This is a period where the patience wins, stay calm. The past three trading sessions highlight this point. After the market dropped four days straight last week, 2 trading sessions later there is an enormous move higher in the markets on Monday. At times like this, less activity may be the more rewarding activity.

The coronavirus news and uncertainty this past week left solid economic reports in the dust. U.S. consumer confidence and housing continue to be supported by low rates. New home sales surged to the highest levels in a decade and pending home sales nearly doubled the estimates. China’s manufacturing reports plummeted to an all-time low, as expected, showing the virus’ devastating impact. The remaining four trading sessions will move with virus news and updates, likely outshining relevant U.S. job reports.

Keep your seat belt buckled, have a great week!

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.

Market Brief February 27 2020

Market Brief February 27 2020

Given the abrupt decline in global stock markets over the past seven days, we thought a quick account update might be helpful. The news flow about Coronavirus has been fast and furious, and we’re sure you’re finding plenty of ways to track the day-to-day developments. This brief note will not focus on statistics or predictions about potential outcomes. Instead, we’ll concentrate on the root concerns surrounding the market decline.

Since learning about the outbreak in China, the markets have seesawed between indifference and alarm. The virus was initially thought to be a problem contained to ‘over there’ that was unlikely to spread to the US and Europe. And to be fair, that was essentially the case in previous epidemic scares such as Ebola, SARS, and MERS. While each of those scares took a brief bite out of markets, they never severely impacted global growth. As we all now know, since coronavirus was detected in Italy, Germany, and the US, markets have swiftly reassessed their ambivalence.

Our assessment of the global economy is unavoidably colored by the potential for a global pandemic. The unprecedented municipal/provincial quarantines seen in China and the interruptions to the education/social systems in Japan, Korea, and now Italy are severe. These measures will restrict global supply chains as well as the ability/willingness of consumers to spend. There is little doubt that if these policies remain in force for an extended period that global economic growth will slow and potentially contract. Yet it is still not a foregone conclusion that ‘an extended period’ is necessarily in the cards.

What might put an end to the market anxiety? Well, the obvious answer is that an effective therapy/vaccine would offer relief to those with severe illness, as well as restore confidence in consumers. Additionally, a reaffirmation of accommodative monetary policy and a pledge by governments to provide fiscal support could help buffer against recession. In fact, the fiscal/monetary playbook being used in China has already begun to yield support to their markets and economy.

The visceral nature of the virus and the potential disruption to people’s daily lives makes this period in the markets especially tense. And going forward, we expect the market will continue to be headline-driven with knee jerk reactions to both the upside and downside. 

As always, we are keeping an open mind to both positive and negative outcomes. If you have any questions or concerns, please do not hesitate to reach out. We will plan on sending more detailed updates in the coming weeks/months as necessary.

Link to schedule a call.

Click here if you would like to learn more about your options and if we can assist you with your wealth management, investment, and retirement planning.

This website is for informational purposes only and is not intended to be specific advice or recommendations. For specific advice or recommendations you would need to meet directly with one of our advisers.