Market Update Q2 2020

As the second Quarter of the year has ended, we want to provide you with a brief Market Review. There have been several significant events that have occurred over the past few months. One of the most significant events has been the market resurgence off the March 23rd low, even with mixed data to support it. Another significant event was the signing of the CARES Act at the end of the 1st Quarter, on March 27th. This was a $2 trillion package to help provide economic relief at the beginning of the COVID-19 pandemic.

We have experienced quite a bit of global uncertainty during the 2nd Quarter. Many of the events that have occurred, and are continuing, are things that we have not experienced in our modern day. Because of this, we are cautiously optimistic regarding the continued growth of the economy and financial markets. There remain concerns over the uptick in COVID-19 infections and a slow reopening of the economy in many US cities. This is coupled with a poor outlook from the Federal Reserve. The question we are currently asking is, will the impact of the massive stimulus provided by the Federal Reserve and Congress be enough to kickstart the economy? The financial markets have pushed forward, with some volatility despite clear headwinds. We will wait to see if the financial markets growth is sustainable and if the economy will pull through these historical events.

When it comes to Global trade, US and China trade tensions had taken a backseat to the COVID-19 outbreak. We are starting to see this issue reemerging to the forefront of headlines, with both countries saber rattling over trade differences. We are hopeful that the current tensions will not derail the progress that has been made, and future negotiations.

The events of this year are different than we expected. Naturally, we weren’t expecting a global pandemic. However, while the events have been different, the reaction of the Federal Reserve is like previous trends. The Federal Reserve has historically reduced interest rates to create liquidity and provide easy access to credit. They have purchased securities to stabilize the markets, and the government has put legislation in place to shore up the economy and financial market to bolster the confidence of the American people.

Now that we are in the 3rd Quarter, we should be cautiously optimistic. Our opinion is that the 3rd Quarter will begin to show us if the monetary moves made by the Federal Reserve, and policies put in play by the US Government, will be what is needed to combat economic and market volatility brought on by the COVID-19 pandemic. If so, this period in economic and financial market history will be put into the playbook as a win. The strategies deployed will be looked to as a solution for future recessionary periods. If not, we believe we will see hardships for the investor that will take creative thinking to put the economy and financial markets back on track.

In light of this, Hayden and I are taking steps to bolster our investment approach. We are constantly analyzing and tightening our process to make sure that it falls in line with our beliefs. After thorough consideration, we are excited to announce that we will be partnering with Dimensional Fund Advisors for our future investment strategies. We will be releasing a more in-depth explanation of how that will impact your portfolios soon. We look forward to discussing these decisions with you.

As always, Hayden and I would welcome the opportunity to speak with you if you have any questions about current market events, or how your portfolio is positioned.