Second Half of 2020
To say the first half of 2020 was “challenging” would be a great understatement. While the year began in a positive manner for equities, the COVID-19 virus changed everything and led to a significant sell-off in global equities. While we tactically raised cash in many portfolios early in the year, it is never enough when the markets experience a free fall in prices.
The market did not give investors much time to buy the lows, however, as a fierce rally ensued in late April. This led to one of the largest 50 day increases ever in the U.S. stock market. The upside increase was nearly as frantic as the downside sell-off. Our long-term bullish stance for equities was certainly challenged but we are undeterred that we are in a secular bull market with many years left.
Looking to the second half of the year, there is no shortage of worries: COVID-19 remains, the upcoming elections, ultra-low interest rates, volatile energy prices, dramatic increase in unemployment and global trade. Record Fed and fiscal stimulus has helped in the short run. In addition, we are witnessing why we’ve been bullish on the future as companies adapt quickly to these challenges and innovation comes to the forefront. The “innovators” as a group are leading the resurgence. We have many investment “themes” we like for longer term investors.
Despite the recent rally, there is still more bearishness than bullishness, a rare occurrence after such a strong rally. Also, there is nearly $5 trillion in cash/money market funds that may get invested over time and support the market.
One other area that is being underappreciated by investors currently is “income” investments. While most fixed income has record low rates currently, there are other areas that do provide much higher cash flow than a 10 year treasury. I believe dividend and dividend grower stocks will come into favor the second half of the year and is 2021. There is enormous demand for quality income producers decreases. We envision a rotation to this area of the market from the growth area.
Thank you for your continued support and confidence. As with other dramatic downturns, keeping a longer term view has served our clients well and presented great opportunities in March and April. We are somewhat cautious heading into the second half but continue our confidence on the long term for both US and international markets. We could see a change in leadership from the large cap growth stocks to value, small cap and international, however, over the next 12-18 months.
Best regards,
Kenneth M. Lampos
Senior Vice President, Investments
This market commentary is provided for information purposes only and is not a complete description of the securities, markets, or developments referred to in this material. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. 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. Dividends are not guaranteed and may fluctuate.
