This year has been a turbulent one, as much of the news and market fluctuations have been centered around the COVID-19 pandemic. Even with COVID-19 still very much in the news, investors are already starting to look beyond the virus and out to the election that is several months away.
This week’s announcement by the National Bureau of Economic Research that the U.S. officially entered recession territory in March was no surprise. March was when the shutdowns began, unemployment claims skyrocketed, and subsequent economic readings started to fall dramatically.
The optimistic tone that led markets over the past few weeks was replaced by pessimism earlier this week. Investors were becoming increasingly encouraged by updates on declining COVID-19 case counts, potential vaccine developments, and plans for reopening our economy. This week’s more somber start came from the reminder that we still have a long way to go. Many fear that we will see a renewed wave of cases with the reopening of cities, requiring closures to be reinstated and prolonging our economic shutdown.
Market volatility remains high but has come down significantly from the extreme levels seen last month. Fiscal and monetary programs designed to assist individuals and companies during this engineered cessation of our economy continue to roll out and have helped calm market nerves and restore financial system imbalances.
During times of market volatility, our team at Buckingham Advisors works diligently to identify opportunities to implement tax and financial planning strategies. While it can be very distressing to see account balances go down, it’s important to remember that stocks/equities are long-term investments, and pull backs and moments of fear are a part of economic cycles. In this article, I want to cover some basic financial planning principles to ease anxiety and discuss a few more advanced planning strategies to consider.
The stock and bond markets continue to ride on the COVID-19 coronavirus roller coaster that started this year. While the recoveries continue to rise in China, news of an increasing spread of cases in other countries has worsened. Prevention and containment efforts here and abroad, from border closings to event cancelations, are lowering estimates for global economic growth.
With all the gyrations in the markets year-to-date, it seems hard to imagine we are only through the first two months of the year! Investors started the year enjoying six new record closing highs from the S&P 500 in January, only to end the month flat. This was followed by seven additional new closing highs during February, with the last one just seven trading days ago! Stocks have turned negative once again and are now down approximately 9% as of mid-day trading today.
With all the gyrations in the markets year-to-date, it seems hard to imagine we are only through the first two months of the year! Investors started the year enjoying six new record closing highs from the S&P 500 in January, only to end the month flat. This was followed by seven additional new closing highs during February, with the last one just seven trading days ago! Stocks have turned negative once again and are now down approximately 9% as of mid-day trading today.
In the month of December, the S&P 500 gained 3.0% and reached new highs. This capped off a year of strong stock market returns, with the S&P 500 up 31.5% including dividends. The Nasdaq Composite reached 9,000 for the first time, while the Dow Jones Industrial Average recently passed the 29,000 level. International and small cap stocks gained as well but did not surpass highs set in 2018. Bond yields remained steady at relatively low levels, which has been good for the housing market but not as favorable for savers.