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Markets Look Past the Coronavirus Impact
... but are they right?
Markets have continued to trudge higher since the historic drop in the 1st quarter of this year. My belief is this continued rise in the face of bad economic news is the result of investors placing a lot of faith in the FED and the Congress to save the economy by continuing to infuse cash and benefits to un/under employed workers and businesses.
While many expected a quick "V" shape recovery, its pretty clear now that will not happen and recovery will take a year or more and not likely happen until a vaccine is fully deployed. As Fidelity's Jurren Timmer talks about in US Stocks, An Unclear Path Forward
article, "stocks continue to churn sideways" as they "struggle with reopening uncertainties". His analysis indicates that where the S&P is trading now "we are currently at the high end of the range" for possibilities levels through 2021.
Below you will find the link to Ryan Walsh's mABC Quarterly Commentary which does an excellent job of addressing the latest news about the pandemic as well as impacts on markets. In this edition he covers the following:
- A summary of the 2nd Quarter 2020 in "Global Market Performance"
- A review of "Coronavirus Update"
- A look at Retail Traders activities in "The Robinhood Effect"
- An outlook for the future in "Look Ahead"
Below shows the time weighted returns of our agreed investment strategies as well as the return of the S&P 500 and Dow equity indexes Year to Date thru June 30th as well as through July 31st. Your diversified portfolios are performing well as compared to these benchmark indexes.
|Agreed Investment Strategies||YTD thru |
2nd Quarter 2020
July 31, 2020
|mABC Moderately Aggressive ||+0.3%||+1.0%|
|Dow Jones 30||-9.6%||-7.4%|
The table below shows the approximate percentages for your accounts in each asset class near the end of the Quarter. I invested in this allocation June 22nd with protective stops orders. The very next day the market dropped and they sold. I reinvested at about the same price point in early July and this is where the account sit today..
|Fixed Income Investments||Equity Investments||Cash Investments|
- Fixed Income Investments (PIMCO Income Fun PONAX) which typically serves as a counter balance to equity investments.
- Equity investments are currently in the broad global index ACWI with Moderate and Conservative accounts invested in ACWV, its Low Volatility equivalent
- Smaller accounts (less than $25,000) are invested in diversified funds AOA and AOM which hold a mixture of equity and fixed income funds. Cash in these accounts is sitting at about 25%
So what's the outlook?
I believe the market will cautiously continue to churn higher if Congress and the Fed continue to be supportive of businesses and employees impacted by the virus. Remember, markets are a forward looking mechanism, typically pricing the market based on what the next 6 - 18 months is expected to bring. However, Congress has not yet reached a deal on extending unemployment benefits and other aid to the un/under employed. And as we get closer to the November 3rd election, political forces rather than what's good for the economy will weigh more. As a result, markets could change their optimistic view 2021 and we could return to the more dire scenario.
The good news is that several vaccines are on the horizon and the government is "pre-investing" in manufacturing the millions of doses necessary to begin treating the general public. Once vaccinations are underway, confidence in going out shopping, eating out, going on vacation, etc (all the ways consumer spend and support businesses and the economy) will begin to move forward. Mid 2021 looks realistic to me to begin to get back to normal.
As always, I will continue to monitor markets and make adjustments to your portfolios as conditions warrant. And I am happy to discuss our respective views in general and your account and investment needs specifically.
Late last year Congress passed the "Secure Act" that affects the timing of Required Minimum Distributions (RMDs) from your IRAs. Below is an article by Fidelity which outlines those changes. Please read if you have Inherited IRA or you have Traditional IRAs and are nearing retirement.
If you took a RMD early in the year, and given the Cares Act, you now know that you didn't need to, the IRS has issued guidance that allows you to roll that withdrawal back into your IRA. See the article below for more details, or give me a call to discuss.
Please continue to follow the social distancing and sanitation guidelines as they seem to be helping attenuate the growing spread of Covid19. And "Mask Up" when in public and you cannot maintain proper distancing!
As always I welcome feedback on this publication and am happy to try and address any topics you might find of interest.
All the best,
Michael Andries, CFP®
mABC Investment Advisors, LLC
+1.713.777.0260 Houston / Galveston Area
Annual Required Disclosures may be viewed on www.mABCLLC.com anytime or by clicking on the following Links:
Please review these disclosure was well as your investment company's quarterly statement (e.g. Fidelity, TD Ameritrade or your 401k provider) to confirm you account activity and balances at least quarterly.
Economic factors, market conditions and investment strategies will affect the performance of any portfolio and there are no assurances that any portfolio will match or outperform any particular benchmark. Investing in Emerging and Frontier International Markets involves special risks, such as currency exchange and price fluctuations, as well as political and economic risks. Commodities may be subject to greater volatility than investments in traditional securities and may be affected by overall market movements, changes in interest rates, other non economic factors such as weather, disease, and embargoes, as well as international economic and political developments. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss.
The information and opinions expressed herein are obtained from sources believed to be reliable and up-to-date; however, their accuracy and completeness cannot be guaranteed. Opinions expressed reflect judgment current as of publication and are subject to change. Information in this document is directed toward U.S. residents only. mABC Investment Advisors, LLC is registered as an investment adviser with the states of Texas and Louisiana and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements.