Banknotes

The election is finally over (we think)! We survived! And while I promise to (mostly) attempt to steer clear of politics here, the results of the election do have consequences for the markets and the economy. It appears that the government will remain divided, which will likely mean fewer surprises when it comes to policy. So, the 2020 beat goes on…now to vanquish the virus and get back to normal – new or not!

Have you ever felt like you were being pulled in different directions? That's how many feel today: Do we go out or stay in? Do we spend or not? Will stocks rise or fall? Will the economy continue to recover or collapse? Very good questions, all.

Looming over everything, of course, is the virus, but there are also various ramifications regarding election outcomes to add to the mix. Perhaps the only thing that is certain is, at this point, uncertainty, and that means, at least in investment terms, more volatility on the horizon. When competing data points cause competing outlooks, can those outlooks become self-fulfilling prophecies?

In today's economic landscape, investors are being pulled in a number of different directions – large-cap stocks vs. small- or mid-caps, domestic vs. international, stocks vs. bonds, traditional investments vs. less traditional ones. These choices can be further complicated by conflicting economic data, much of which can be spun to suit any particular agenda. With all of this to contend with, how do you make decisions on how and where to invest?

Like dieting or dealing with the virus, a solid approach begins with common sense. Eating less and exercising has always been the best method for losing weight; likewise, taking reasonable precautions is critical to staying healthy during this pandemic. The same principles hold true when it comes to investing: Setting reasonable goals, taking action, and sticking to the plan generally works best, without letting all the economic noise get in the way. Here, we'll take a quick look at some of the economic data, and try to make sense of it. 

Already in 2020, we have seen market rallies, crashes, and rallies once again. We have seen very low unemployment, historic spikes, then drops. The economy has gone, and continues to go, through its own set of gyrations. It is hard to figure out how one is supposed to feel and then be able to react appropriately. However, if there ever were a time when staying the course and taking a longer-term perspective was appropriate, this is it.

Please note that, while monetary issues and considerations pale in comparison to the human toll that the coronavirus pandemic has taken, this commentary addresses the investment impact the virus has had – and is having – on the markets. We feel for and wish those having to face the effects of the virus the best of luck and a speedy recovery.  

The coronavirus has radically affected the lives of everyone in this country – and, indeed, the world – in an unprecedentedly short amount of time. News of it on the radio, TV, and internet seems all-consuming. This piece is not intended as an update on the virus, because by the time it’s published any news contained herein will be outdated. Instead, the purpose here is to discuss the investing environment, both during this crisis and beyond.

In light of recent volatility attributable to the spread of the coronavirus – technically, COVID-19 – it's appropriate to provide some insight into what is happening in the equity markets, and how State Bank of Cross Plains' wealth managers are responding. The drama that has played out over the past couple of weeks has resulted in a correction (a 10% drop from a recent peak) in the stock market in an extremely short period of time. In fact, right before the outbreak, markets had hit an all-time high. The perceived severity of the downturn (due to its rapidity) has stoked fears of a 2008 market sell-off and, perhaps, a recession.

It's only a slight exaggeration to say that 2019 was a year that rose out of the ashes of the fourth quarter of 2018. People’s memories seem to be getting shorter, so it can be easy to forget how bad that quarter was. Technically, the economy entered a bear market in December, though many may not have realized it at the time. The reason being, most people measure such things at the close of trading each day, and while the market did hit a point where it was down 20% from its peak, it didn’t close that way. If it had, economists would be either talking about a new bull market or looking for a catalyst to set the stage for one. Given the speed of the market’s recovery, benefited by several record-setting highs, it is safe to assume that the longest-running bull market in history continues unabated, likely with more to come. The past year returned exceptional results in virtually every category, including fixed income.

No getting around it: August was a rollercoaster. Market volatility increased, understandably impacting investor confidence. So what do we have to look forward to in the near future – an upswing, a downswing, more of the same?

Summer has arrived, and with it, the return of long, hazy days, filled with lazing by the pool, or on the beach, or at the lake. A sense of peace and calm, that things are just right in the world.