Midyear Outlook 2020

Client Letter: September 2020

September 3, 2020

Dear Valued Investor, 

Back to school this year will be different. On the one hand, like other years, it marks the end of summer, the arrival of cooler weather, kids hitting the books again, and Labor Day gatherings. But unlike other years, going back to school carries unique concerns because of COVID-19. This year, we’re all getting an education in remote learning, working from home, and social distancing. 

While the COVID-19 fight is not over, more progress has been made recently. New cases and hospitalizations in the United States have been falling steadily since mid-July. Several promising vaccine candidates have entered phase-three trials in the United States, and the FDA could potentially fast-track approval for emergency use later this year. Abbott Laboratories has developed a $5 COVID-19 test that the company claims can produce reliable results in only 15 minutes. The fruition of pandemic developments may be getting us closer to the end of the pandemic. 

The stock market has responded to these promising developments with fresh record highs for the S&P 500 Index and its strongest August performance since 1984. Stocks have also received a boost from surprisingly strong recent economic data, which already may have brought an end to the “lockdown recession.” 

The brightening economic picture helped second quarter corporate earnings beat estimates by an average of 23%, more than in any quarter since FactSet began tracking earnings statistics in 2008. Estimates have risen to the point where analysts expect 2021 S&P 500 earnings to surpass the 2019 level. 

But even if the recession may be over technically, the path forward may be challenging. MGM, American Airlines, Coca-Cola, and other major corporations recently announced thousands of layoffs. If lawmakers can’t agree on another stimulus package soon, the road ahead will get tougher. 

Now that the Democratic and Republican national conventions are behind us, election season is in full swing—and with that comes the potential for increased market volatility. September historically has been the weakest month for S&P 500 stock performance, but during election years, it switches to October, when policy anxiety typically peaks. With stocks pricing in significant optimism after such a strong rally from the March lows and these seasonal headwinds on the way, the potential for a pullback remains high in our view. 

At the same time, we believe we are in the beginning stages of a new bull market, which suggests additional gains for stocks may be forthcoming. That’s why we think it makes sense for suitable investors to be patient, stick with their target allocations—particularly those with multiyear time horizons—and resist the urge to get more defensive. Stocks appear to be expensive, but so do bonds. Even though stock market volatility may increase and stock returns potentially may fall below long-term averages, we continue to expect stocks to outperform bonds over the next 12 months. 

Good luck with the transition back to school, to a new season, and to the new norms—and stay safe. As always, please contact your financial advisor with questions. 

Sincerely,

Wayne Rigney

Rigney Financial Services

 

Important Information

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. 

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

All data is provided as of September 3, 2020.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. 

All index data from FactSet.

This Research material was prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

Tracking # 1-05050782 (Exp. 09/21)

Client Letter: August 2020

August 6, 2020

Dear Valued Investor, 

The battle versus COVID-19 continues. The spread in some of the recent hotspots like California and Florida is slowing, while states in the Northeast and Midwest are now experiencing increases in cases. According to the World Health Organization, 27 vaccines are in human trials, and the chances of an approved vaccine by late this year or early next year are quite high. We continue to side with scientists and humankind’s resolve, as the entire world is working together, and we believe we will beat this latest adversary. 

In good news, the S&P 500 Index has moved into positive territory for the year (as of August 5) after being down more than 30% in March, making 2020 one of the largest reversal years ever. Going back to 1950, however, August and September historically have been the two worst months of the year for stocks. In addition, signs of recent weakening in the job market, based on stubbornly high jobless claims, combined with evidence of reduced consumer mobility from several high-frequency data points suggest the stage could be set for stocks to take a well-deserved break. 

At the July 29 Federal Open Market Committee meeting, Federal Reserve (Fed) Chair Jerome Powell made it very clear that the Fed has additional tools to support the recovery, and that low interest rates may be here to stay well beyond this year and next. The economy has improved off the March lows, but it isn’t near the record-breaking levels we saw earlier this year. Powell also noted that further relief from Congress was “essential” to help support the economy. 

Meanwhile, Congress is inching closer to a new COVID-19 relief bill, but parties remain at odds over several key elements. Although the two sides appear far apart, we expect a deal may likely be struck at the eleventh hour—consistent with typical Washington theater. At this time, we expect Congress to agree to a stimulus package in the neighborhood of $1.5 trillion, bringing the total US fiscal stimulus to more than $4 trillion. 

Signs that the economic recovery may be leveling off have not prevented corporate America from delivering earnings well above expectations. Leaders like Apple, Amazon, and Facebook reported extremely strong results in the second quarter, helping these influential stocks move significantly higher. FactSet consensus estimates of future earnings have ticked higher as well, suggesting corporate America may be confident in the eventual economic rebound. 

Baseball Hall of Fame catcher Yogi Berra said, “If you torture numbers enough, they will tell you anything,” which fits well with what we’re seeing right now in 2020. Some data appears good, while some data appears troubling. This journey is not over yet, and there may be more twists and turns before society and the economy can fully recover from COVID-19. But like all journeys, this one has an end date, and we will get there. 

Until then, please remain diligent and strong, and I encourage you to contact you me if you have any questions. 

Sincerely, 

Wayne Rigney

 

 

 

IMPORTANT INFORMATION

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. 

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. 

All index data from FactSet. 

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. 

This research material has been prepared by LPL Financial LLC. 

Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL affiliate, please note LPL makes no representation with respect to such entity. 

RES 55809-0720 | For Public Use | Tracking # 1-05040636 (Exp. 07/21) 

Weekly Insights: July 31, 2020

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Client Letter: April 27, 2020

 April 23, 2020 

Dear Valued Investor, 

“Life is 10% what happens to you and 90% how you respond to it.”

— Lou Holtz, Hall of Fame football coach 

As the battle against the COVID-19 pandemic continues, how we respond to it will determine how we beat it. Continued sacrifices range from everyone in the medical community working on the front lines to the thousands of truck drivers across our country keeping goods flowing, parents who have become homeschoolers, and folks missing their family events to help stop the spread of this terrible outbreak. As Lou Holtz said, we can’t control what happens, but how we respond to it is what matters. Our response to this crisis has shown the resolve and strength of the human spirit, which is why we will overcome. 

The response from the economy and stock market, however, has shown a disconnect between the two. Tragically, 22 million people have filed for unemployment in the past four weeks, nearly wiping out all the jobs created during the record 10-year economic expansion. Historic drops in consumer confidence, retail sales, industrial production, oil prices, and housing starts have shown how quickly our economy has gone from solid growth to virtually stopping in its tracks. Yet, stocks have been soaring the past few weeks. Remember, stocks tend to weaken before the economy, and they tend to lead before the economy turns around. Stocks see light at the end of the tunnel before the economy feels it, and the big move recently may be a sign the economy could turn around later this year. 

Small businesses have been impacted the most by the economic crisis, and the government and Federal Reserve actions to bridge the gap to better times are unprecedented. The combined stimulus from fiscal and monetary policy is more than 20% of the value of the entire US economy, as measured by gross domestic product, greatly mitigating the economic hardships. The hurried roll out of the small business loan program wasn’t perfect, but it is helping those businesses. 

This recession—though not officially declared yet—is unlike any we’ve ever seen. It wasn’t caused by the virus itself, but by the government telling people to stay home in an effort to flatten the curve. We don’t think the government can simply turn on a switch to get things back to normal, but with all of the stimulus making its way through the system, we think this could be one of the shortest recessions ever. 

First quarter earnings season has begun, and we are interested to learn how quickly corporate America anticipates the slowdown ending. Estimates for earnings in 2020 have reduced drastically, but there is still hope that a strong second-half economic rebound could help support a recovery in corporate profits. 

More than 2 million people worldwide have been infected by the virus, and we all have been impacted in some way. There are drug companies all around the world working nonstop to find an effective treatment, while Boeing, one of the hardest hit companies during this crisis, said it might start building planes again soon. We aren’t out of the woods yet, and the economic data and headlines may get worse before they get better, but our response to this crisis reinforces our confidence that the future remains bright. 

Stay healthy, and please contact me with any questions. 

Sincerely, 

Wayne Rigney

 

__________________________________

IMPORTANT INFORMATION

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. 

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results. 

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. 

All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy. 

Tracking # 1-05002504 (Exp. 04/21) 

Weekly Insights: April 20,2020