Good Afternoon,
As we approach the half year mark on June 30th, our world looks a little better than it did just a few short weeks ago. Countries all over the globe are reopening and we are all adjusting to a new normal. While there are still no specific treatments for COVID-19, we do know that multiple vaccines and anti-viral treatments are currently in late phase clinical trials. Several of these vaccines will likely be game changers in the battle against this horrific pandemic. We expect to know much more about the efficacy and availability of the first vaccines within the next 3-6 months.
Nowhere is optimism over a potential Coronavirus vaccine more apparent than in the stock market. Since hitting a dramatic low point on March 23rd, the stock market has soared! In the last three months the Dow has increased by 26.66%, the S&P by 28.22% and the Nasdaq by a whopping 36.79%. While the Dow and the S&P are still slightly negative year to date, the Nasdaq has gained 13.09%! Some of us have a love/hate relationship with technology but the recent shutdown of the global economy highlighted our reliance on technology for everything from grocery shopping to corporate meetings. The result was increasing investments in companies like Apple, Microsoft, Amazon and of course Netflix!
It can be very confusing to see high rates of unemployment and businesses struggling to stay afloat while the stock market rises in spite of it all. The stock market is thought to be a leading economic indicator. A leading economic indicator is any economic factor that changes before the economy heads in a specific direction. What does that mean? When we buy or sell a stock/mutual fund, for example, we do so based on what our expectations are for the future of that stock/mutual fund. Stock prices are what we call "forward looking." The stock market is currently encouraged by the prospect of effective Coronavirus treatments on the horizon. In addition, business activity in the US private sector has improved for two consecutive months. New home sales jumped sharply in the month of May, according to Commerce Department data. When people are buying new homes, that points to consumer confidence in the economy. According to The Wall Street Journal, "data from France suggests a stronger than expected recovery after lock-down measures were lifted. Activity levels throughout Europe also improved to their highest level since February." Given this data, the stock market is expecting a return to more robust economic activity as our economy and those all over the world continue to reopen. In other words, the stock market is optimistic!
It has been a tough few months but our economy is more resilient than we could have imagined.
The stock market downturn and subsequent recovery has been a real test for some stocks and mutual funds. Most have held up remarkably well and have rebounded in lockstep with the market or better. Others have noticeably lagged and these are the investments that need some attention. If you have accounts that are not held at Kestra that you would like me to review please call my office to schedule an appointment. Now is an excellent time to review and revise asset allocations if necessary.
Thank you for your feedback on our client appreciation events! We will be in touch with details on the upcoming Shred Event and the Thanksgiving Pie Day. Until then, wishing you a wonderful, healthy summer!
Johanna