June 2020 E-Newsletter: Market Update

Jonathan M. Gardey, MBA, CFA®, CFP®

President and Chief Executive Officer

I hope everyone is staying healthy and keeping positive under the varying levels of Covid-19 restrictions!  With the start of the economic reopening, here are our thoughts!

Market Update

The market has had a wild ride.  World stock markets peaked in early February and then rapidly declined through late March due to the coronavirus and the various governmental responses to the pandemic.  Then in late March, just as quickly as the markets started to fall, world stock markets reversed course and marched higher in quick order.  These positive returns have reversed approximately two thirds of the earlier market losses.  This recovery can be partly attributed to the quick Federal Reserve and Congressional actions designed to support markets and economic activity.  The market decline for February and into March, while fast, steep, and at times, frightening, was only an average market drop when compared to past market declines.

Looking under the surface of the world stock indexes, some areas of the market have held up well, why others have not.  Large tech-type companies have done well and are now only down approximately 6% from their February highs.  Dividend paying companies, on the other hand, are still down approximately 19%, international stocks are down approximately 17%, and small US stocks are down anywhere from 15% to 25% from their February highs.  Especially hard hit industries include leisure, travel, and retail business.  The market stresses are so negative in these industries that the weakest companies, such as Hertz, JC Penney, and Neiman Marcus, are being forced into bankruptcy.

 What’s Next for the Markets

The economic impact of the pandemic is still being assessed.  As the economy begins to reopen, there are still significant questions regarding the future trajectory for the Covid-19 pandemic: what will the availability of testing be and will there be a second wave during the flu season? These questions and their answers will continue to impact economic activity and the markets.

What Do We Think

There is still a good amount of uncertainty regarding how all this will play out.   The underlying economy was strong when the shutdowns started. We expect the pent-up demand for goods and services from the shutdown should help jump start the economy. Our expectation at Gardey Financial Advisors is there will be periods of volatility down the road.  The benefits of diversification between stocks and bonds has “paid dividends”, and we expect this benefit (the inclusion of bonds in portfolios) to continue.  We also anticipate the market will recover the losses much quicker than it did during the financial crisis of '08 and '09.  In regards to interest rates, we do not see them rising in the near future.  In fact, interest rates could potentially decline further.

The silver lining we see is many US based companies may re-evaluate their offshore operations and start moving some back home.  This would be positive for jobs and the economic activity that would follow.  We are currently evaluating the investments in our portfolios to take advantage of this potential shift.

Closing Note

I encourage everyone to step back and reflect on how they spent their time over the last two months.  Daily routines and schedules were turned upside down to accommodate the unprecedented situation we still find ourselves in.  As the restrictions are lifted and we start down the road to “normal”, how we filled some of this time will fade to memories.  A great example of this is my two adult daughters attempt at cutting my hair.  I now know why they are not hair stylists and they agree! Hopefully other activities, for me, sitting around the table with family working on a puzzle or playing cards, may be the start of a new family time tradition. We have completed more puzzles over the last two months than we have in the last 23 years.  My hope is that everyone identifies what is important to them and then makes this part of their new normal.

Important Disclosure Information

Gardey Financial Advisors Disclosure  Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Gardey Financial Advisors (“Gardey”), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Gardey. Please remember to contact Gardey if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.  Gardey is neither a law firm nor a certified public accounting firm and no portion of the commentary content should be construed as legal or accounting advice.  A copy of Gardey’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.