Good Afternoon,
As I write this newsletter, the stock market looks a lot better than it did yesterday. The stock market will probably continue to be somewhat shaky due to a few things that are happening in our world:
- Coronavirus cases are spiking anew in Europe. "Infections in Europe are rebounding partly because millions of people have grown tired of social distancing, mask-wearing and hand-sanitizing, and have relaxed their behavior, health experts said. The public’s fatigue and yearning to get back to normal life are two of the greatest challenges facing governments as they try to keep a lid on infections as winter approaches."* The increase in coronavirus cases is making investors jittery over fears of new lockdowns.
- Uncertainty over whether or not Congress will pass another relief package providing much needed unemployment benefits.
- The potential for an extended period of uncertainty following the upcoming elections.
The stock market doesn't do well with uncertainty!
In spite of some periodic market jitters, the stock market has staged an epic comeback from one of the most devastating economic collapses in our history. The Dow** and the S&P 500*** plunged by nearly 35% within a six week period between February and March as the economy shut down and the virus spread throughout our country. Since that perilous time, the stock market has been on an unprecedented climb unlike anything we've ever seen in modern history. The Dow is flirting with February 12th's all time high while the S&P had its biggest five month rally in more than 80 years. The S&P's journey from record high to bear market and back to a new record high took just 126 days. In previous market downturns, going all the way back to 1928, it took an average of more than six years for an index to return to record levels.
This years stock market advance might seem perplexing in light of the ongoing pandemic, continued mass unemployment and depressed corporate profits in sectors that are still suffering mightily with Covid restrictions. Many of you have asked how the market could possibly rebound given the current state of affairs. Here's what's driving the market:
- Optimism
At the heart of the stock market recovery is the unwavering faith that the US economy will fully recover once the pandemic is under control. As divided as our country is right now from a political standpoint, politics and the election will be eclipsed by the roll out of one or more Covid-19 vaccines. The world is on stand by as we await the introduction of the first Coronavirus vaccines. We are probably only weeks away from the first vaccine. While you may question the safety and efficacy of a vaccine that was produced in record time, never before has the global medical community communicated and collaborated so tirelessly towards a common goal. Investors are optimistic that a vaccine will result in the full reopening of businesses and a gradual return to an economy working at full speed. The travel, hospitality and entertainment sectors should benefit greatly as people feel more comfortable flying, eating in restaurants and staying in hotels.
- Investors (like us!)
Investors couldn't pass up a good bargain! We've learned over time that market downturns can mean profits down the road! Investors took full advantage of the market downturn pouring money into the market over the last few months.
- Economic Stimulus
Unlike the recession in 2007, Congress and the Federal Reserve acted swiftly and boldly in response to this year's economic crisis. The Fed cut interest rates to near zero, loans were paid out to businesses large and small and stimulus checks were sent out to more than 150 million Americans. The quick response from our Government helped to instill confidence in investors and spark the stock market's amazing rebound.
While we are expecting the market to react like a tempestuous teenager to the upcoming elections, keep in mind that it's just the market reacting and not an indication that the market is in for a long and precipitous fall. Just the opposite is true. A Covid vaccine will likely fuel the market for the foreseeable future and may very well be the catalyst for restoring the economy to its full potential. I'm optimistic and I hope you are too.
As we continue to social distance and "lay low" I hope that you are seeing people that you love, finding ways to socialize in a safe way and keeping active! One thing I've learned from my time on the Alzheimer's Association Board is that physical activity may be one of the keys to keeping Alzheimer's Disease at bay. So keep moving!
One final thought.....as I mention above, I am a Board Member of the Alzheimer's Association of Baltimore. Alzheimer's Disease is all too familiar within my family. Both my father and my mother in law are currently in Memory Care. On October 24th, the Alzheimer's Association is sponsoring an event: Walk to End Alzheimer's. Because of Covid, this is not a group event. This is a walk, on your own or with a group of people that you trust. You can walk in your neighborhood, on a trail, anywhere at all. Seems pretty simple but that's it...walk to raise awareness of Alzheimer's Disease. You can also join my team and make a small donation to the Alzheimer's Association if you are feeling charitable. Here is a link to my team page:
https://act.alz.org/site/TR?fr_id=13499&pg=team&team_id=641249
You can also find us on Facebook at JLB Wealth Management Group. Take a look at our page and let us know what you think!
Wishing you a great day, a glorious fall and above all, good health!
Johanna
*As Covid-19 Infections Fuels Infections in Europe, Italy Resists Second Wave: Wall Street Journal, September 22, 2020
**The Dow Jones Industrial Average (DJIA) is a widely-watched benchmark index in the U.S. for blue-chip stocks. The DJIA is a price-weighted index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange and the NASDAQ. Investopedia 2020
***The S&P 500,or simply the S&P, is a stock market index that measures the stock performance of 500 large companies listed on stock exchanges in the United States. Wikipedia 2020