Stocks Keep Flying Higher

Posted in , By David M. Smith

The news for the last week has been brutal, to say the least.  Riots have broken out in major cities, unemployment is rapidly increasing, China reduced freedoms in Hong Kong reigniting trade tensions, and coronavirus deaths continued to climb.  The lone feel-good news item was SpaceX successfully launched the first orbital mission from U.S. soil in almost a decade.  Axios  But some market watchers are wondering if the stock market is what's really heading to outer space.  Despite all the tough economic and political news, the stock market continues marching higher and as of this week, the S&P 500 was down year to date less than 5.0%.  It is truly a remarkable turn of events for investors.

The events of the last few months reinforce how difficult it is to time investing.  Very few predicted COVID-19 would have such a devastating effect on society since other viruses over the last two decades had virtually none.  Equally, few would have predicted such a dramatic and swift rebound with the backdrop of very bad economic news.  I am starting to see articles about investors who sold out of the markets when they were down while waiting for better news before reinvesting.  The good news has still not arrived and they may have missed most of the recovery.  It’s another example of why trying to time the stock market is so difficult and why a long-term view, sensible asset allocation, and a rebalancing strategy often leads to the best investment outcome.  A popular investment saying nowadays is that investors are rewarded for "time in the market, not timing the market."  That has certainly been true this year. 

  • COVID-19 Facts – What We Know:  After several months of living with COVID-19, researchers are discovering more and more about the virus:  It doesn't seem to spread from surfaces as much as we initially thought; wearing masks helps a lot; we will probably be living with the virus for a while, and it produces more symptoms than first expected.  The article highlights these and other known facts about the virus.  NYT
  • Cities Coming to Grips With Tough Decisions:  Municipalities are struggling with lost revenues from businesses, commuters, and tourists.  Portland was featured in this article on the current environment and tough decisions to be made regarding cutting services or taking on more debt to make up for the shortfall.  WSJ
  • The All-Powerful Federal Reserve:  As credit markets were starting to freeze up in March, the Fed announced it would do whatever it takes to restore orderly activity.  Programs were rolled out, including one in which the Fed would buy new and existing bonds from companies.  It's been over two months and anyone want to guess how many bonds they have bought?  Zero.  Just announcing the program to support the market was all that was needed to inject confidence and the return of orderly trading.  Never fight the Fed.  WSJ
  • Hong Kong Security Law:  China announced new security laws in Hong Kong.  It effectively removed the one-state-two-systems rule that has been in effect since 1997.  In response, President Trump announced the U.S. will remove the special trade status that the city had enjoyed as a region separate from China.  The move was not immediate but when/if it goes live, it will subject Hong Kong to the U.S. – China trade war issues and will dramatically affect the 1300 U.S. companies located in the city.  Is this the end of the capitalistic and free Hong Kong the world has known for the last century?  Eurasia Group  NPR
  • Quick Hit Articles for the Week:

    • Health experts dispute virus is becoming less lethal: Wash Post
    • Generation Z is optimistic about their financial future even in this economy: Morningstar
    • Which countries' economies are reopening – a visual chart: Visual Capitalist
    • The U.S. savings rate hit an astounding 33% in April due to less spending & more savings: CNBC
    • Data and charts on how employees and companies feel about remote work: Visual Capitalist
    • Don't fear the murder hornet: Wash Post
    • Life's too short to listen to bad advice on wine: WSJ
    • And how to have fun tasting wine: Wash Post
  • Impossibly Good Plant-Based Meals Are Not Beyond Your Cooking Skills:  With shortages and skyrocketing prices for meat, many Americans are turning to plant-based meat substitutes such as Impossible and Beyond for the first time.  They are a staple in our household and sometimes I can't believe the similarities to real meat.  If you are new to the PB scene, here are some tips for how to best cook and incorporate them into your favorite meals.  NYT  NYT
  • How to Brew Better Coffee at Home:  Morning rituals are hard to change and I can't imagine starting the day without a good cup O'Joe.  I've used K-cups, Nespresso machines, and even Starbucks instant Via coffee (the Portsmouth office is equipped for all three!).  If you are willing to spend the time and are looking to brew the perfect cup at home, read on.  WSJ
  • Love for the Independent Local Bookstore:  There aren't many local book stores anymore, but I love going into the Water Street Bookstore in downtown Exeter, New Hampshire (famed for their close relationship with Dan Brown).  The store is cozy and warm and the employees there love books and always have great suggestions.  Recently, I purchased "The Body" at the WSB by one of my favorite authors, Bill Bryson.  What are your favorite local independent bookstores?  Water Street Bookstore

Thank you for reading The Friday Buzz.  Please give feedback regarding the newsletter and forward it to anyone who may enjoy the articles.  Have a nice weekend.  Be well and stay safe!

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About the Author David M. Smith

David is a Senior Financial Advisor and the firm’s Co-Chief Investment Officer. He has more than 20 years’ experience in the financial services industry and holds the highly respected Certified Investment Management Analyst™ and Certified Financial Planner™ designations; he is a Co-Managing Member of the firm.
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