John Iammarino gives his insights into the June 2020 markets.
June 2020 Market Watch Video
Folks, I will admit, last month’s video was pretty brutal...but then again, so were the numbers…so are this month’s numbers more uplifting?
That’s what we will discuss in our June 2020 Market update.
May was another great month for stocks as the market clawed back more of the year-to-date declines. The bounce back rally has been very sharp but a period of digestion of these large gains may be due.
However, the market plays by its own rules and once you figure them out, the market changes the rules. Many investors think that trying to pay attention to the economic news can help them make good investment decisions. If that ever was the case, those days are long gone because everyone has access to instant economic news and quite frankly the mainstream media is losing more and more credibility by the day.
I mean the news has been terrible during the last 2 months, yet the market has staged one of the sharpest rebound rallies on record. The takeaway is that news headlines have nothing to do with making good long-term investment decisions.
So what is behind the recent rebound?
First is Stimulus:
There are two types of stimulus programs, Fiscal and Monetary.
Fiscal stimulus is from the government, executed by the Treasury, and recorded on the government budget.
There is a clear appetite in Washington to do much more fiscal stimulus spending in addition to the already outrageous stimulus handed out. There have been rumors of perhaps additional stimulus checks and/or the potential for tax credits on domestic travel.
Monetary policy is executed by the Federal Reserve, the central bank of the United States, and recorded on its own balance sheet.
The most important takeaway from this month’s Fed meeting is that policymakers don't expect to raise short-term interest rates until at least 2023.
Fed Chairman Jay Powell stated the Fed is not even "thinking about thinking about raising rates."
The second is the economy itself:
Turning off the global economic light-switch, and then turning it partially back on, has sent shockwaves through economic data that, while anticipated, have been jaw-dropping in both directions.
There was an absolute blowout number for retails sales in May,
surging 17.7% to crush even the most optimistic forecaster estimate of 8.4%.
Sales excluding autos rose 12.4% in May.
The consensus expected an increase of 5.5%.
Profits will be down substantially in the second quarter but should recover strongly in the several quarters thereafter. Meanwhile, the money supply is growing rapidly, and the Federal Reserve is prepared to keep monetary policy loose for the foreseeable future
As we have discussed over the last several months is: Ultimately what matters is how much private-sector income revives, and how quickly. The early stages of the recovery will look like a "V,"
Now This doesn't mean the US is fully recovered, or even close; a full recovery is going to take at least a few years. But we are hopeful for more positive numbers from here on out.
What should we expect.
Even in the best of times, economic forecasting can be difficult. Today, the outlook is clouded with a much greater degree of uncertainty around the virus.
The numbers have shown a good start to the rebound with states reopening. Businesses will reemploy furloughed workers, help stabilize the economy, and set the stage for a possible economic rebound later in the summer. There is a lot of pent up demand, people have been cooped up and are ready to go out and enjoy life, especially with the summertime.
And lastly, our further progress in developing a COVID vaccine.
However, the media is talking about a spike in COVID cases, so - could that effect the markets? It could, market sell offs are often attributed to FEAR…but one thing we must remember is much of the market’s decline in March were due to the economic shutdown not the virus itself. Doctors are hopeful the virus will dissipate with the hotter summertime weather.
What can we do now?
By now, you may have recovered a good portion, if not all of your portfolio losses. This is a great time to look at your portfolio and ask, was the market loss too much for me to handle? Behavioral finance tells us that we are irrational investors, we make bad decisions during bad times.
So, now we sort of have a re-do - or a mulligan for all you golfers…now is the time to reset your portfolio according to YOUR risk tolerance. Also, you need to ask, is your portfolio truly diverse?
Over time, retirees will find that focusing on a risk appropriate - globally diversified portfolio is far more important than any short-term economic scenario.
Market cycles come and go, but diversification will endure long past any individual market cycle has run its course.
SO… Review your plan, does that plan truly solve your concerns and is it based on your values?
Don’t have a plan?
GET A PLAN, you CAN’T WING THIS…March was a real-life stress test of your portfolio, use what you felt and learned and improve your plan.
If you want to review your plan or you need help with designing a HOLISTIC RETIREMENT PLAN, …A plan that just doesn’t focus on investments, but looks at all aspects of your retirement life, then give us a call or click on the link below to schedule an appointment.
That’s June’s 2020 Market Update
Stay healthy- stay the course and GOD BLESS!
Sources: First Trust June 2020 economic updates.
Brookstone Capital Management June 2020 Monthly Market Watch.
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