3 Reasons why the market has been upSubmitted by Financial Planning Solutions, LLC on May 14th, 2020
A pandemic, record high unemployment, a business decline in restaurants, hotels, airlines and general uncertainty. Sure doesn't seem like a positive for stocks.
And yet, after the initial drop in 2020 due mostly from the Coronavirus and a severe drop in oil prices, the market seems to have rebounded after bottoming out on March 23rd.
What's changed? Has the virus been eradicated? Have businesses all reopened? Have the 36 million unemployed suddenly gone back to work? No, no, and no.
Then what gives? Given the state we are in, it is only logical to scratch your head and wonder what is going on.
- The stock market is not a be all and end all of how the economy is doing. Rather, it is an indicator of how investors perceive how well companies will do going forward. Many know things are bad right now but logically know things will improve over time. Investors can embrace news of layoffs (which many big retailers have done) as a positive sign of cost cutting which can increase profits.
- Trillions of dollars being pumped into the economy by the feds through the CARES Act has been a positive move and investors feel the government will do whatever it takes to move the country in the right direction.
- With lower interest rates and certain segments of the market doing well. (think Amazon and Netflix) investors are confident that the big companies will weather this storm and recover and go even higher.
So, does this mean we are in the clear? That is it safe to go back in the water? Hardly. In my opinion we will continue to see further volatility. Up days, down days, days where the market just churns along without seeming to go in either direction.
If one is a long term investor, staying the course (assuming it still aligns with your overall financial plan) can be the best move you can make.
Have extra cash sitting around above what you need for an emergency fund and have little or no high interest debt? Now could be a great time to sit down with your financial advisor to discuss a strategy.
Any questions, please don't hesitate to reach out. We are here to help.
In good health.
All the best.
Rick Fingerman, CFP®
Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.