Covid-19 has had a profound effect on all of our lives and seems set to continue to do so for the foreseeable future. We firmly believe that we will prevail over the virus, but it will take more time than any of us want, and the costs in all facets of life have been—and will continue to be—enormous.
The Covid-19 pandemic has set upon the globe with lightning speed and is unlikely to leave us anytime soon. First and foremost, we hope that you, your family and loved ones are well. While the level of disruption that the virus has caused to our daily lives is unprecedented, we wish to offer hope with a healthy dose of realism.
Most investment professionals would agree that stock market price movement in the 0-5% range is just ordinary market movement or statistical “noise”.
The fourth quarter of 2019 brought the decade to a close in a manner consistent with U.S. investors’ experience during the past ten years. Calming trade tensions propelled the S&P 500 index to a 9.07% total return and 22 new all-time closing highs. Trade tension between the U.S. and China has been one of the largest macroeconomic risk factors hanging over the global economy for the better part of the past two years.
The third quarter of 2019 was full of noise and lacking substance. There was a terrorist attack on oil facilities in Saudi Arabia, which affected the price of oil for about two weeks, and now oil is right back where it started. The U.S. dollar continued to grind higher and has now appreciated ~12.6% since its 2/16/2018 low. Manufacturing and trade continued to wane as the trade war drags on.
Which index has realized the highest 1-year return through June 30th, 2019?
I have spent the last five weeks travelling around the country visiting advisors and clients, and speaking at events. At each meeting, I ask my audience if they are aware that the S&P 500® Index is about to undergo the largest reconfiguration in its history. So far, the resounding answer has been “no” so we thought it was important proactively help educate about this significant change with another memo From the Desk of the PM!
At the end of 2018, interest rates were heading higher due to a hawkish Federal Reserve (FED); both global trade and manufacturing were slowing as the trade war raged on; and earnings expectations were being revised down. This led investors to conclude that the economy was slowing both abroad and here at home.
During the holiday-shortened last week of 2018, the S&P 500 Index gained ~6.7%. Normally such returns would be a cause for celebration, but this quarter it only lessened the pain. The S&P 500 ended December down ~8.8% bringing the fourth quarter’s return to -13.8%. Volatility is back with a vengeance as the market is rising and falling 2, 3, and even 4% at a time. So, what is going on?
What does a typical bear market look like? How long do they last? When are the majority of the losses incurred? Most investors believe that the losses occur fairly evenly throughout the Bear. Based on the past, with one notable exception, nothing could be further from the truth.