Please buckle your seat belt, we are about to experience some turbulence…
It would have been nice if Chairman Powell had ended his press conference this week with that warning.
And with that, the S&P 500 was lower by 5.9% at the close of business June 11, 2020.
So why this now? We seemed to be well on the road to recovery.
And that right there, in itself, is the problem. Perception and reality are two different things. As states begin to loosen restrictions, in some areas of the country you would never know there was a quarantine in place. Additionally, the start of the summer season has lured many folks out of their caves and back into society. I being one of them. For example, like a crazy person last week, my wife and I went and had lunch IN a restaurant. And while the food was the same as months before, the experience has clearly changed. Tables being spaced further apart, equate to less patrons, which means less sales, and you get the point.
Simply put, stocks have come way too far too fast. And this week they were given several doses of reality.
First being the increase in hospitalizations. This is a trend that is obviously very concerning, as the economy can not endure another shutdown without an infusion of money that would need to be quickly deployed and of a much greater scale.
Second is the sobering fact that Chairman Jerome Powell indicated federal reserve rates would be held steady in all likelihood until 2022.
Third, the National Bureau of Economic Research declared the recession officially started in February.
Frankly, hitting the pause button with a sell-off like this is a good thing in my opinion.
That being said, the reality is this:
-This is not going to be solved overnight, but there are advancements being made everyday in the healthcare area.
– The Federal Reserve has been crystal clear that they will use everything in their arsenal and then some to help the economy.
-The sell off brings companies’ share prices more in alignment with reality. For example: Have airlines seen more passengers? Yes. Enough to warrant the run up in their prices? No.
-Reality equates to opportunity. There will be clear winners and losers in the markets from this pandemic, and as I have previously alluded to, those that have invested in the customer experience have a huge opportunity, and as those companies become clearer, the opportunity to grab them during these types of sell offs becomes more enticing.
-Companies are still increasing their dividends.
So what should you do in light of the selloff?
Control what you can control:
-If you can, consider taking advantage of the delay in the tax filing deadline, and fund a Traditional or Roth Individual Retirement account for 2019, or your health savings account if eligible.
-If you were thinking about putting some money to work in the market, now may or may not be the time, but it is worth the discussion.
-Revisit refinancing your mortgage if you have not done so already.
And most importantly, remember we were here (2,237.40) less than 3 months ago:
And where we are now (3,002.10).
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.