Q2 2020 Economic and Market Perspective

Where do we even begin? Between the global pandemic, economic downturn then prompt upturn, and a nationwide quarantine, we can hardly choose the most notable highlights to touch on. Global stocks saw about a 25% decline overall in March as states began their mandated shutdowns, only to begin the attempt to normalize almost immediately in April with a 15% and 13% gain for Nasdaq and the S& 500, respectively. All the major US equity indices worked to rebound more than 15% for the second quarter with the Nasdaq leading to finish up 30.95%, the S&P up 20.5%, and the Dow Industrial Average under-performing among them at 18.51%. The markets continued with some expected volatility in May and June, however optimism among investors prevailed and the rally continued with almost all indices finishing positive for three consecutive months. Crude oil prices and gold both had strong showings in Q2, following the markets lead with a slow start but rallying towards the end. Even still, high-yield bonds experienced a mild dip, and Q2 earnings estimates fell 28.4% along with an ever-increasing unemployment rate as businesses struggle to stay afloat amid the pandemic shutdown.

Tech stocks led the way in the second quarter, primarily attributed to a large percentage of America’s workforce working from home, utilizing streaming services, and engaging home fitness equipment while honoring various states’ stay at home orders. Around mid-June, there was slight volatility in whether investors would begin the move back to “go out and be active” stocks rather than the “stay at home” stocks- however, even though economies have begun to reopen, case numbers have continued to rise and investors have predominately decided to stay put in their portfolios. This is proving to be a prudent decision as certain states have reverted back to quarantine mandates in order to combat the rising case numbers across the country, giving the United States only one word to describe the outlook for the remainder of 2020: uncertain.

The Federal Reserve has been active in its attempts to stimulate the economy despite the obvious stress of businesses shutting their doors and attempting to re-build in accordance with state-regulated safety protocols. The CARES stimulus bill was noble in its effort to provide Americans the capital to spend with a $1,200.00 check along with Paycheck Protection loans for qualified individuals and businesses. However, with the shutdown lasting longer than anticipated and some state economies going back on lock-down, businesses have continued to struggle, and workers are fighting for another stimulus bill in the wake of this historically unprecedented period. Both political parties are tirelessly working to come to an agreement on the additional bill and the Federal Reserve has been very vocal on remaining stagnant with low interest rates as a means of keeping money inexpensive for unemployed Americans. While the equity rallies have been impressive and brought the indices back on track for meeting year-end goals, investors remain cautiously optimistic as they need to be prepared for what goes up to potentially come down. With the upcoming Presidential election and increasing political tensions, being mindful of a deep recession and a pandemic with an impending vaccine is critical.

We are confident in our ability to address each day as it comes and act on the best interest of our clients’ long-term goals. What we have always said has finally come to fruition and we can confidently say that we are prepared for whatever the rest of 2020 will bring. As always, we encourage clients to take this time to engage us in doing a deep review of current accounts because we know goals may have shifted and you have plenty of other things to worry about right now- your peace of mind concerning your financial stability should not be one of them.

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