The worldwide battle versus COVID-19 continues both on the public health battlefield and the economic one.
The spread in some of the recent hotspots like California and Florida is slowing, while states in the Northeast and Midwest are now experiencing increases in cases. According to the World Health Organization, 27 vaccines are in human trials, and the chances of an approved vaccine by late this year or early next year are quite high. This news has been partly responsible for the confidence we have been witnessing in the stock market. Humankind has an impeccable reputation of working together to beat a common enemy. COVID-19 will be no different as the world joins together to beat this adversary.
Here’s some good news!
The S&P 500 Index has moved into positive territory for the year (as of August 5) after being down more than 30% in March, making 2020 one of the largest reversal years ever. At the July 29 Federal Open Market Committee meeting, Federal Reserve Chair Jerome Powell made it very clear that the Fed has additional tools to support the recovery, and that low interest rates may be here to stay well beyond this year and next.
Be prepared for headwinds.
Going back to 1950, August and September historically have been the two worst months of the year for stocks. In addition, signs of recent weakening in the job market, based on stubbornly high jobless claims, combined with evidence of reduced consumer mobility from several high-frequency data points suggest that stocks may take a well-deserved break.
Signs that the economic recovery may be leveling off have not prevented corporate America from delivering earnings well above expectations. Leaders like Apple, Amazon, and Facebook reported extremely strong results in the second quarter, helping these influential stocks move significantly higher.
Baseball Hall of Fame catcher Yogi Berra said, “If you torture numbers enough, they will tell you anything,” which fits well with what we’re seeing right now in 2020. Some data appears good, while some data appears troubling. This journey is not over yet, and there may be more twists and turns before society and the economy can fully recover from COVID-19. But like all journeys, this one has an end date, and we will get there.
In closing, I would like to commend you – my friends – for staying the course and not giving in to panic when the financial markets were rocked. The financial experience you gained during this season will help you weather future economic challenges.
Please remain diligent and strong, and contact me with any questions. I’m only a phone call (or email) away.
Managing Partner / Account Executive