Intra Year vs. Calendar Year
As we all struggle together through life under a pandemic, we thought we would start this week’s market update with a quote we came across that reinforced our confidence in a brighter future ahead:
“The fundamental nature of human beings is to be resilient, to be problem-solvers, to be ingenious, and to overcome challenges through innovation. This is why the economy, with all the bumps along the way, tends towards growth over time. And markets are just a reflection of the real economy.” - Dave Yeske
On Monday, March 23rd, the Dow Jones Industrial Average (DJIA) index hit an intra-day low of 18,213. Today, thanks to flattening infection curves and promising new drug therapies, the DJIA is trading at 23,963. This represents a gain of over 31% since hitting a low just 24 days ago. The S&P 500 index has experienced similar results over the past 3 1/2 weeks.
Below is a chart covering the last 20 years of market returns. The chart illustrates that market declines intra-year often provide a very poor predictor of how market returns will end up for the full year.
We can’t say how the markets will perform throughout the rest of 2020, but we are confident that companies all over the world are already adapting to the current pandemic environment and figuring out new ways to grow their businesses. We continue to advise our 457(b) clients to stay fully invested in the markets right now, and when possible - use this opportunity to buy equities (stocks) while prices are low.
Nearly all economists agree that the U.S., and most other world economies, are now in a recession. A recession is defined as a period of at least 2 quarters (6 months) of negative economic output or gross domestic product (GDP). Yesterday we learned that last week’s new jobless claims were a staggering 5.6 million. This brings the total of newly out of work Americans to approximately 22 million since this crisis started in early March.
While the current economic picture is very bleak, there is still much to be optimistic about when looking forward over the next 6 to 12 months. If governments are able to cautiously and safely re-open their economies, then the amount of fiscal and monetary stimulus now in the system should act like lighter fluid on a campfire. Federal banks and policy makers appear to be globally unified in their efforts and goals to reignite economic growth when the “all-clear” is given.
Financial Planning Tip
Many Americans received their government stimulus checks this week. For most families this money will provide a needed resource to buy food and pay rent and mortgages during a period of temporary unemployment. As Certified Financial Planners, we continue to encourage our clients to build and maintain an emergency fund for unexpected economic events just like we are having today.
Your emergency fund should be held in a fully liquid and accessible account. It should be an amount equivalent to 3-6 times your total monthly expenditures on all things.
As always, please reach out if we can be of assistance!
- Your DecisionPoint Financial Planning Team -