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Wealth Management Market Update

Investment Update

Updated September 25, 2020

Our investment team remains committed to helping you achieve your goals. We are constantly monitoring and evaluating the markets to provide you the most relevant financial information related to COVID-19 and how we look ahead from here.

Information is changing quickly, and, as always, we are available for personal consultations. This page is another resource, and we will be updating it regularly with information and insights.

What is the latest economic data telling us?

These are the drags we see in the current economy:

1. Some sectors of the economy continue to be dormant or seriously restricted

2. Failure to pass a fourth stimulus bill

3. COVID-19 cases spiking in Europe

4. Continued layoff announcements

However, these strengths are driving economic growth higher:

1. The strongest housing sector since before the great recession

2. Restocking of extremely low inventory levels should boost GDP

3. Virus therapeutics continue to improve and there is progress on vaccines

4. Lagged impact of monetary stimulus both here and abroad

5. Improving economic data throughout the rest of the world

6. The Federal Reserve is committed to accelerating growth

It is easy to have a negative outlook on the economy given a once-in-a-century health crisis and a period of social upheaval. However, it is important to take a sober, unemotional view of the current economic conditions. Equally important is to maintain a long-term investment horizon and a diversified portfolio..

How are the markets performing?

After peaking on September 2, equity markets have struggled this month. The S&P 500 is down approximately 10 percent and the tech-heavy NASDAQ is down approximately 12 percent from its highs. The sell-off started in the large-cap growth stocks that had led the markets this year. Other market sectors, such as energy and financials, have joined in this pullback. The S&P was up more than 60 percent from the March lows, and September is historically the worst month of the year for equities. Given the dramatic rally that markets have seen, this pullback is not a complete surprise.

What effects will the recent Fed policy shift have?

Fed Chairman Jerome Powell recently announced that the Federal Reserve will now tolerate periods when inflation runs higher than 2 percent to even out periods when it has been below that mark. Previously, the Fed would take action to avoid inflation rising above the 2 percent level regardless of how much or how long it had been running below that level. In practical terms, this means the Fed is likely to keep short-term interest rates low for a longer period of time. This is seen as a positive for stocks, as investors look for better returns than low yielding fixed-income investments.

What is the status of more fiscal stimulus?

The passing of Supreme Court Justice Ruth Bader Ginsburg will make the ability to negotiate a fourth stimulus bill more difficult. The anticipated time and effort that will be dedicated to the process of selecting a replacement justice will presumably limit negotiation on the stimulus package. A fourth bill has been a difficult process due to the lack of urgency that propelled the first three and the proximity to the election on November 3. The inability to come to an agreement will likely lower the growth rate for the fourth quarter, but should not derail it.

What should I be doing with my investments?

We encourage you to pay attention to the latest developments, but not to lose sight of your long-term investment strategy. Reach out to our investment team to discuss your options and reaffirm your timeline and goals. Call our investment team at (518) 415-4401.