Financial Planning and Market Update 10/01/20
Dear Friends & Clients,
To the tune of “Autumn Leaves” (played by Miles) we’re happy to be presenting Daken Vanderburg’s latest Update in this issue of The Navigator, along with the DFG’s Monthly Review of Financial Planning Topics and the current issue of The Soloist.
Recently, Daken held a private session (via Zoom) for our joint MassMutual Trust Company clients. His presentation echoed many of the themes that as readers of his Updates you are familiar with.
One question has surfaced again and again following his Updates – what is the actual connection between the dramatic decline of the growth rate of Covid-19 cases (from doubling every two days in March to doubling every 100 days plus now) and the synchronous rebound of the stock market? What is the mechanism – do investors watch the growth rates every day and then decide whether to buy or sell? Unlikely, but what IS going on?
This question came up at our meeting, and Daken helped clarify what he thinks is happening. One doesn’t influence the other directly, but the movement of the markets is tied to something that IS greatly influenced by the direction the virus is taking, and so they are connected.
The thinking goes that in the early days of the spread of the disease there was an expectedly extreme reaction – things shut down, people stayed home, most commercial activity (at least on Main Street) came to an abrupt stop. Uncertainty ruled the day – was this 1918 all over again, or worse, a new plague that would wipe out millions all over the world?
The degree of that uncertainty increased, until it became clear over a relatively short period of time that though this was bad, it would probably run its course, and that the rising growth arrow would begin to curve downward, which it did, dramatically. The consensus was set — the virus, and not economic fundamentals was responsible for the bear market, and once it loosened its grip, the equity markets would rebound and they did.
So as clarity and optimism began to re-introduce themselves, and people began venturing out (probably too soon, but that’s another story) and parts of the economy slowly re-opened (again, in many cases too soon), the initial panic flipped to belief in recovery — in the future, not immediately, but then the markets are generally forward facing. As investors regained belief that there would in fact be a time again of corporate growth and profits, and the Fed and Congress did their thing, the markets responded favorably. That declining growth rate of the virus turned out to be a handy measure of brightening prospects. After all, with consumer spending responsible for 70% of our economy, consumers’ willingness to venture out into the marketplace was a strong signal that things were getting better or would soon improve.
And here we are, not without blips and backtracking, but the stock market’s recovery to date is nothing if not dizzying. Daken said again that the stock market is NOT the economy — improvement there lags far behind, especially the Main Street economy. Unemployment is still at intolerable levels, small businesses that escaped bankruptcy now have to survive without the help of Congress, at least for the time being, and of course people are still dying, and suffering in many ways. We all will be watching the numbers over the coming colder months with the expected rise in infections pre-vaccine, as well as the onset of flu season.
Daken went on to say that no one knows what the immediate future holds. Many are nervous about election-year volatility, and as Daken always says, no one can predict the short term, but what we do know is that over longer periods of time investing in a well-diversified and disciplined manner in the equity markets is still the best way we know to keep up with inflation and more and plan for our future.
In addition to Daken’s current Update and our monthly financial planning review, please follow the link to the latest issue of The Soloist, our new newsletter for Solos – mature adults who live alone without the support of spouses, partners or children and others whose lives share some of the same special interests and needs of Solos. Our website contains an archive of our newsletters and Updates.
We want to hear from you – please share your thoughts, questions and ideas — write to me directly at firstname.lastname@example.org.
Stay well, stay safe, stay in touch!
Allen Davis for the DFG Team
Allen J. Davis, CFP® ChFC
Financial Planner and Advisor
Davis Financial Group, LLC
10 Bay Road, Hadley, MA 01035
(413) 584-3098 x211 office
(413) 570-8311 direct line
(413) 584-0160 fax
Due to the escalating COVID-19 situation, we have suspended in-person meetings and visits to our office to protect our clients, employees and the greater community, and to do all we can to flatten the curve. That said, we remain fully staffed and capable to conduct all business remotely via phone, email, web conferencing and paperless technology and serve existing and prospective clients alike. So please don’t hesitate to call or email us if there’s anything we can do to help you.
We wish you good health and look forward to hearing from you soon.
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