Update for June 2020
Financial Market Update
Volatility is back! Last week the stock market suffered one of its worst declines in months leaving many investors questioning if the rally from the March lows has come to an end. Prior to this sharp drop stocks had been consistently marching higher and higher leaving many investors perplexed as to why. After all, consumer confidence remains low, corporate earnings are projected to collapse 30% or more in 2020, and unemployment is over 13%. Couple this with an escalation of geopolitical pressures abroad and racial tensions here at home and you seemingly have a perfect storm for financial market Armageddon. Admittedly, we did have a very encouraging employment report come out recently with 2.5 million jobs added in the month of May, but by no means does this suggest we are out of the woods yet. Thus, given the lingering economic concerns what could possibly be supporting stock prices near record highs? Enter the Federal Reserve.
We normally like to keep these updates void of too much economic theory, but to explain what is going on we are going to provide some context of what appears to be driving financial markets at the present time. While we are all aware of the economic difficulty so many Americans are currently facing, the response by the Federal Reserve has investors confident a prolonged downturn will not happen. David Rosenberg, of Rosenberg Research, summed it up perfectly in a recent research report to clients, “… statistically speaking, the correlation between the equity market, and the Fed balance sheet has now crossed above 90% over this interval (the stock market bottom until now), even greater than the already-intense relationship during the 2009-2013 era of ever-expansive QE (quantitative easing). The correlation between the S&P 500 and the real economy over this interval is close to zero.”
Fatherly Advice for your Finances
A recent T. Rowe Price study found that as many as 54% of young adults say their parents had an influence on their financial habits and behaviors. Tenley Desjardins asked our Wealth Advisors to share the best advice they got from their fathers, financial or otherwise, which impacts how they advise their clients and manage their own finances.
The Danger of Emotional Investing
Two of the most well-known investment phrases are, “you can’t time the market” and “past performance is no guarantee of future results”. Despite the overwhelming number of investors who agree with these statements, when markets experience rapid declines, such as we saw in March of this year, rational thought can sometimes get thrown out the window.
Q2 2020 Investment Review Webcast
We will be hosting our Q2 2020 investment review webcast on Monday, July 6th at 1:00 ET. This webcast will provide a recap of how the financial markets closed out the second quarter as well as a real time update on how some of the investment managers in your accounts are navigating the current market environment.