Monthly Newsletter

7 Hastings Circle
Pittsford, NY 14534

Phone: 585.442.7580
Toll Free:
877.835.8039

jmfeld@aol.com

Monthly Newsletter

July 4, 2020

Investment Strategy Report

Market Uptrend Continues Despite Spike in New Virus Cases.  Nasdaq Hits Record High

To paraphrase Groucho Marx (who said “Who you’re going to believe, me or your lying eyes?”), who are you going to believe, the thousands of new cases of Covid-19 being reported each day as the US begins to re-open, or the stock market.  If you just have been paying attention to stock prices, you wouldn’t know that unemployment is still over 11%, that thousands of companies are going bankrupt, and that there are a growing number of consumers defaulting on their loans.

A week ago, during the weekend of June 27-28, I was very concerned about the prospects for the stock market.  The S&P 500 had just fallen 2.4% the previous Friday, 6/26, and news over the weekend (6/27 and 6/28) was not good, as attempts across the country to re-open were not going well.  My concern was the stock market was overly optimistic about the opening of the economy, and that the reality of the severity of the pandemic would shock stocks back down to lower levels.

So what has ensued since then?  During the 4 trading days this past week, stocks rose every day with the S&P 500 and Nasdaq  rising 4.0% and 4.6% for the week.  The market’s “flagrant” disregard for the crisis might have gotten some justification on Thursday when the June jobs report showed that 4.8 million jobs were added in June, vs. the 2.5 million that were expected.  The unemployment rate, once feared to hit 20%, had dropped from 13.3% to 11.1%.  However, the number of new virus cases continues to climb, with new daily infections surpassing 50,000 this past week.  In no way has the all clear signal been sounded for the stock market.

As I have written about several times over the past months, the general consensus among most analysts that I follow is that while we should continue to have a volatile stock market over the short term (the next few months), over the longer term, stock prices should be higher than current levels.  Since hitting an interim peak on June 8th, the S&P 500 has cycled up and down, finding support at its 200 day moving average (around 3,020).  Only the Nasdaq has managed to surpass its June 8th high to reach a record level, as growth companies continue to lead the market (and our growth mutual funds continue to outperform).

Analyst Tony Dwyer made an important point on CNBC (6/24) about why the stock market will continue to move higher: uncertainty has been removed.  When stocks were hitting all time highs back in February, the corona virus represented an unknown threat.  Now 5 months later, we know 1) the physical threat that we are facing, 2) the government monetary response that has been put forth, and 3) the potential medical treatments that are being developed.  The latter treatments, along with the unprecedented trillions of dollars being allocated to support that economy, will help prop up the stock market.

Scott Garliss and Chris Igou of Stansberry Research (6/26 and 7/2) address the fear factor and its effect on stock prices.  When investors are fearful, like I was last weekend, that is bullish for stocks.  Scott reported that investors are currently shorting stocks (i.e., betting that they will fall) to the largest extent since 2011.  He goes on to say that a recent survey from the American Association of Individual Investors (AAII) reported that 48.9% of respondents were bearish, well above the historical average of 30.5%.  Chris discussed the stock market fear “gauge”, known as the VIX.  It went from levels below 15 in February to a high of 80 at the height of the market collapse in March.  It has since fallen back down to about 30.  “Historically, when the VIX falls back from record highs, it’s a good sign for US stocks”.  When the VIX has fallen from elevated levels to below 35, “buying leads to outperformance, with winning trades 82% of the time over the next year”.

I understand that investing during such volatile times is difficult and risk is high, which is why I have adopted a somewhat more cautious allocation for many of my clients.  Hopefully this will allow us to stay the course for the longer term, to reap the benefits of what should be a continuing stock market recovery.

Waiver of RMD’s – I have mentioned previously (in April and May) that there are no required IRA distributions for this year.  However, the IRS is now saying that if you have already made withdrawals from your IRA accounts and want to transfer that money back in, you have until August 31st to do that.  Please contact me if you think that you might be interested in this.      Jeff Feldman 


                        Market Data - 7/4/20  


  
Dow Jones                S&P 500             NASDAQ          Russell 2000              10 Yr Treas

   25,827                         3,130                   10,208                 1,432                            0.67%

     Earnings Yield (S&P)                           Gold                         Crude Oil
         4.91%                                                $1,787                         $40.32

                                                                                           
 Archives

JANUARY 2015             JANUARY 2016                   JANUARY 2017                 JANUARY 2018                  JANUARY 2019
  
                                                                            
FEBRUARY 2015           FEBRUARY 2016              FEBRUARY 2017               FEBRUARY 2018                FEBRUARY 2019

              
MARCH 2015               MARCH 2016                MARCH 2017                    MARCH 2018                   MARCH 2019

                 
APRIL 2015                      APRIL 2016                     APRIL 2017                          APRIL 2018                         APRIL 2019
 
                
MAY 2015                        MAY 2016                        MAY 2017                             MAY 2018                             MAY 2019

                       
JUNE 2015                      JUNE 2016                       JUNE 2017                          JUNE 2018                            JUNE 2019

                
JULY 2015                   JULY 2016                      JULY 2017                        JULY 2018                          JULY 2019

                                                                                                                                                                                                           AUGUST 2015                 AUGUST 2016               AUGUST 2017                     AUGUST 2018                         AUGUST 2019


SEPTEMBER 2015       SEPTEMBER 2016      SEPTEMBER 2017        SEPTEMBER 2018               SEPTEMBER 2019


OCTOBER 2015                  OCTOBER 2016            OCTOBER 2017                OCTOBER 2018                    OCTOBER 2019


NOVEMBER 2015              NOVEMBER 2016         NOVEMBER 2017               NOVEMBER 2018                NOVEMBER 2019


DECEMBER 2015             DECEMBER 2016         DECEMBER 2017                DECEMBER 2018                 DECEMBER 2019





                                                       
                                                                             
                                                                                      

                                                                   
 

                                          



                                                                                     
                       

                     
                                                               


                                                                                                      
 
                     
                                                                                                                                                       

                  
                                                                                                           

                                                                                                                              

                                                                                                                                                       
 

 

Website Builder