Dear Legacy Wealth Alliance Family,
Last week Friday represented the 19th anniversary of the September 11th attacks. For me, this day came and went without much of an opportunity to reflect on the significance this event had on our country and remember the almost 3,000 people who lost their lives that day or shortly thereafter resulting from the early-morning attack on the World Trade Center and US Pentagon (1). This weekend I had a chance to slow down and remember this event, where I was when it occurred and how it affected many more American lives than just those lost that day. During this reflection I could not help but be reminded of the similarities to the COVID-19 pandemic we are experiencing now as it relates to the scale of each catastrophe. Both have affected every-day American’s and their families and resulted in major initiatives to combat similar instances from occurring again. Yet, the biggest similarity between the two events is the ensuing uncertainty caused by each crisis. Where do we go from here? How can we make sure this will never happen again? Why didn’t we see this coming? Much like the September 11th attacks, 19 years from now we still may not fully understand why or how a crisis of this magnitude can occur. As we continue to grapple with the pandemic, this year’s annual remembrance ceremonies looked different from previous years. No matter how you chose to reflect on this day, images of what happened on 9/11 will forever serve as a reminder of the resilience we had—and still have—as a nation in the face of tragedy. As the world continues to change, the suffering and strength of that day will always remain a part of us.
One of the major impacts from the COVID-19 pandemic that we are now working to peel back is the resulting slowdown and near screeching halt the virus placed on an otherwise strong U.S. and Global economy. Prior to the resulting business shutdowns in February of this year, the number of working Americans reached a record high of 158.8 million with the number of out-of-work Americans totaling 5.8 million. Only two months later this number had plummeted to 133.4 million working Americans and the jobless number soared to a shocking 23.1 million by the end of April 2020. As of the end of August and the most recent employment numbers, the new total has rebounded to 147.3 million with jobless workers now at 13.6 million as of last month. The latter number represents a national jobless rate of 8.4% (2). As illustrated in the employment numbers above, the economic recovery has been underway since the end of April but there is still a way to go to get back to the pre-COVID employment numbers from February.
In tandem with the economic uncertainty, the S&P 500, reached an intra-year low on March 23rd. The S&P 500 closed at 2,237.40, down 33.9% from the intra-year closing high of 3,386.15 attained on February 19th. It took 23 trading days for the market to price in roughly a 1/3 decline in U.S. large-cap equity valuations in anticipation of the pending economic fears. As I am writing this letter on Monday, September 14th unofficially the S&P 500 closed at 3,383.54. That is 2.61 points less or -0.08% from the February 19th closing high prior to the COVID-related market sell-off (3). Why does any of this matter? It illustrates how fast the market can change, many times in advance of the actual economic data. Had we attempted to time “the bottom” of the correction, we would have most certainly been late to the party trying to enter back into the market with economic data in this instance trailing the market’s valuations by nearly two months. As many of us quickly forget how these market corrections look and feel, please keep in mind as the election draws nearer, market fluctuations will begin to pick back up. We hope not to the extent witnessed just over 6 months ago but nonetheless we anticipate bumpier roads ahead. Since May, the past two weeks have been the first consecutive down weeks experienced in the U.S. equity markets. Much of this is being attributed to election uncertainty, uncertainty surrounding a new wave of economic stimulus and the feeling tech-stocks have become over-valued compared to their peers. With increased volatility re-emerging and the fears of a “second” selloff in the equity markets, here are some things we came across last week that give us reason to be optimistic moving forward:
Q2 2020 Earnings Season – Of the companies that make up the S&P 500 Index, reported earnings were off 30% year-on-year, the worst since Q1 2009 or the midst of the Great Recession. While a 30% downturn in earnings is concerning, expected results were feared to be far worse as we entered earnings season. With 499 of the S&P 500 companies having reported quarterly earnings results, 83% topped expectations, the highest percentage on record, dating back to 1994, and well above the long-term average of 65%. That quarterly performance relative to investors’ expectations – and what it says about the disconnect between how Wall Street thought the economy was performing and how it actually was performing – are important, and legitimate, catalysts for the dramatic rally in US equities these past several months (4).
Comparing Bull Markets – Since hitting a bear market low on 3/23/20, the S&P 500 has gained +54.5% (total return) in 116 trading days through Friday, September 4th. By comparison, the recently ended 11-year bull market for the S&P 500 (lasting from 3/09/09 to 2/19/20) gained +53.3% (total return) during its first 116 trading days on its way to a +529% (total return) overall bull market gain (5).
The Most Paid Social Security Benefits – The maximum Social Security benefit paid to a worker retiring at full retirement age in 2020 is $3,011 per month, triple the $975 per month maximum benefit paid 30 years ago (6).
Homes Going Fast – 68% of the 597,000 existing home sales that took place in the United States in July 2020 were listings that were on the market less than 1 month (7).
As consumer optimism ramps back up, we continue to focus on the COVID-19 pandemic and the upcoming election as key drivers for the economy and financial markets over the near term. Other positive happenings include the Federal Reserve’s expanded monetary policy support with the introduction of a more flexible inflation target and that fiscal policy continues to remain supportive towards a recovery. Many are also expecting that an additional fiscal package will be completed before the end of the year. Throughout the remainder of 2020, we are expecting the equity market to show continued volatility in the near term as we navigate an economic recovery. If you or anyone you know is interested in reviewing their portfolio prior to the end of the year, please contact our office to schedule a mutually convenient time to hold a review. Wishing everyone a safe rest of September.
Jon Launder, CFP®
- Department of Labor
- Yahoo S&P500 Historical Data
- Brinker Capital Weekly Wire 9/14/2020
- BTN Research
- Social Security Administration
- National Association of Realtors
This information does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may view this information. Statements, opinions, and forecasts made represent a particular observation and assessment of the market environment at a specific point in time and are not intended to be a forecast of future events or a guarantee of future results. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended. Statements regarding future prospects
may not be realized and may differ materially from actual events or results. Past performance is not indicative of future performance.