Considering the continued move higher in global equity markets, from the late March lows, it is clear that the aggressive measures taken by fiscal and monetary policymakers has been well received by stock market investors. However, with daily flare-ups of COVID-19 and several states either postponing or pushing back their reopening plans, market volatility is still the order of the day.
On the economic front, the abundance of data, both positive and negative, serves up daily reminders of the uncertain times in which we are living. The extremes are almost unprecedented. One day the world is anticipating new highs, the next day is Armageddon. And while we understand that it can be difficult to remain optimistic in the face of these competing excesses, where there is no consensus or middle ground, we do see glimmers of hope suggesting that things are, in fact, getting better, albeit slowly.
Instinctively and logically we know that there is light at the end of the pandemic tunnel, but at the same time understand that the near-term unknowns have the ability to derail investors from their long-term convictions.
Some people are naturally wired to filter out the media circus whose sole intention, it often seems, is to capture and control our opinions. Others may be more sensitive to the constant stream of noise and clamor and thus more susceptible to the inevitable feelings of elation, uncertainty, hope and fear that these current events foster. As it all relates to the work that we do for you, our clients, rather than allowing market volatility impact ones financial well-being, we believe that aligning portfolios with investors’ stated and evolving long-term goals provides us, as it should you, with unwavering confidence and in a way that no market condition or media talking head can equal.
We believe that among those things that matter most is how much our private-sector income revives, and how quickly. Realistically, we may not see improvement on this front until the end of 2021, or longer, and for our real GDP to match prior highs. As of today, it appears normalization will occur in fits and starts. Take solace knowing that we are confident that the U.S. economy will repair itself as will the capital markets.
Shorter-term, in the current state, our markets are focused on determining whether things are getting better or worse. That constant tug-of-war creates volatility. To reiterate, to us things appear to be improving ever so slightly even considering that COVID-19 is a bear that we will all be wrestling with for a while. Adopting a longer-term perspective, we are fortunate to live in a country where free-markets and capitalistic spirits are welcomed and in fact celebrated, where entrepreneurs and innovators work tirelessly to make our lives better, each competing for our hearts and our business. Capital is like water, it is always in motion, flowing to opportunities, finding a way. So while brick and mortar retailers have
taken a hit, for example, the companies with the best and most robust digital online solutions have experienced an acceleration in their success. While movie theatres have been empty for months, Netflix has experienced an enormous increase in their subscriber base. There will be losers and winners and forever the landscape will change. Deliberate and thoughtful decision making, balancing risk with opportunity, is as important now as it ever has been.
For these reasons, and given the current environment, we are comfortable maintaining a sizable allocation to risk control securities, such bonds and cash, and we are confident that our longstanding preference for U.S. growth oriented stock exposure will continue to enable portfolios to meaningfully participate in rallies during this period of heightened volatility.
If anything in your circumstances should change, please share that and other new information with your Wealth Advisor.
SAGE Investment Committee
Any opinions are those of the SAGE Investment Committee and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.
The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor’s results will vary. Past performance does not guarantee future results. Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Expressions of opinion are as of this date and are subject to change without notice.
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