With election results looming, COVID cases rising, and the timing for another round of stimulus still in question, I wanted to send a quick note with some updates and insights. I also want to remind everyone (including myself) that amidst challenges comes opportunities.
Yesterday, Fed Chairman, Jerome Powell, spoke to the nation. I’d like to share some important highlights on some of the FACTUAL data he uses to make important decisions around the monetary policy that keeps our economy moving forward.
- Economic activity and real GDP picked up 3rd quarter with the economy reopening, however, it will take some time for it to get back to levels we saw pre-pandemic.
- Household spending on durable goods is strong but service spending (like travel and hospitality) is obviously still very low.
- The housing sector has fully recovered from the downturn and business investment has picked up.
- Unemployment has declined over past several months but still remains high, especially for lower wage workers in the service sector.
The overall outlook for the economy remains uncertain and, in some sectors, recovery is dependent on the approval of a vaccine and people feeling safe enough to get out more. Powell said, and many agree, that it’s likely Congress will pass a bill for additional stimulus, but the timing and amount remains unknown. Short-term, (and only short-term) I think the timing of additional stimulus will be an important indicator for the behavior of the stock market between now and year-end.
Bear in mind, the actions of the Federal Reserve have a greater impact to the stock market and the economy than who wins the election. We tend to overlay our personal political views and human feelings onto the stock market. Elections themselves tend to be very short-term drivers of the market at best.
The post-COVID market rally we’ve seen in the stock market comes almost solely from a handful of companies that make up a large percentage of the overall market index. Only 6 stocks, infamously known as the “FAANGM stocks” (Facebook, Amazon, Apple, Netflix, Google, Microsoft) make up 26% of the overall S&P 500 Index based on their market cap. They are up approximately 35% year-to-date whereas the other 494 companies are down, on average, 10% YTD. We are watching for a rotation into sectors outside of tech and/or back into value stocks or good dividend-paying companies. Earlier this week, for instance, we saw big gains in the healthcare sector. I have and will continue to make strategic moves in your portfolio to buy companies and/or sectors that appear under-valued and poised to rebound.
I want to leave you with this – I truly believe that following doomsday predictors comes with a high opportunity cost (more than just financially). I cannot emphasize enough the importance of staying invested in a portfolio appropriate with your risk tolerance, goals, and time horizon. Big stock market declines are normal and will continue to be seen but keep in mind, not all your money is in stocks. Unless you are an aggressive investor with me, we have several other asset classes in your portfolio to lower correlation among your investments, provide diversification, and lessen volatility.
Lastly, here are some important announcements and housekeeping items from Angel that we’d like to share:
As the Holiday’s approach we wanted to let you know changes to our office hours:
- Wednesday, November 25th Closed at Noon
- Thursday, November 26th Closed for Thanksgiving (Stock Market Closed)
- Friday, November 27th Closed (Stock Market Closed @ noon)
- Thursday, December 24th Closed at Noon (Stock Market Closed @ noon)
- Friday, December 25th Closed for Christmas (Stock Market Closed)
- Thursday, December 31st Closed at Noon
- Friday, January 1st Closed for New Year (Stock Market Closed)
While the 2020 Required Minimum Distributions (RMD) were waived by the CARES Act, that isn’t expected to be the case in 2021. If you would like to set up instructions for future RMD’s from your IRA such as direct deposit, update tax withholding’s or set up a monthly payment I’m happy to walk you through the process or get paperwork to you. Any existing instructions will be honored unless you have contacted our office to cancel them.
If you have changes to your information such as address, phone numbers, emails, beneficiaries or trusted contacts please let us know. Many of these updates require paperwork to change them and I’m happy to provide that service whenever needed.