In his recent shareholder letter, Howard Marks of Oaktree Capital wrote, “There’s simply no room for certainty in investing, and today more so than usual.”
In our previous post, we walked through the initial downturn of the stock market and what the recovery time looked like during previous health crises. Here we are, almost a month later to the date, and where we’ve seen some lifts and improvements we are all wondering one thing– are we on the road to recovery?
Last week, the S&P 500 rose 12% and had its best week since 1974, despite 6.6 million people filing for unemployment. This market action came on the heels of the S&P 500 having its worst month (March) since October 2008 and ending its worst quarter since the final three months of 2008, down 20%. Corporate earnings season starts today and the general consensus is that the reports are all going to be ugly. Yet, the S&P 500 is up over 2%. Why is the market doing so well while all of the news is bad?
One reason is uncertainty. The market hates uncertainty.
In mid/late March as we saw the coronavirus really start to impact the US. Businesses of all sizes were closing, we were uncertain how the government was going to help both businesses and individuals, and there were no emergency policies in place. It seemed as though we were in a “wait and see” pattern. Fast forward a few weeks, and while there is still uncertainty with this crisis, things are much clearer now. We know that policymakers and the Federal Reserve are going to provide stimulus to businesses and individuals, and emergency policies have been put into place.
Are we out of the woods yet and headed down the road to recovery? That’s hard to say. In fact, it has become challenging to know what kinds of expectations are being priced into the market because there has been no consensus on what to expect. Is it possible that the market has bottomed and we are on the road to recovery? Yes, that is entirely possible. But it is also just as possible that uncertainty could rear its ugly head again and this market rally could go by the wayside.
For the time being, we are staying cautiously optimistic and will keep a close eye on the market.
For resources and further information related to COVID-19, please visit our COVID-19 Resource Page.
Ryan McDaniel is a Certified Financial Planner and is a financial advisor at EM Ford. With ten years of experience in the industry, Ryan specializes in retirement planning, navigating his clients through this process seamlessly and ensuring financial preparedness. Outside of retirement planning, Ryan is an expert in the field and helps his clients prepare and protect their future while also planning for life's uncertainties. Contact Ryan at firstname.lastname@example.org to learn how he can help your pursue your financial goals.