Undeniably, spring 2020 has tried the patience of all investors. Thankfully, 99% of Henry Wealth Management clients have remained patient and have trusted their long-term financial plans and investment allocations. Many have even added in additional funds.
Sure we have experienced the end of an 11-year bull market, certainly in a compressed fashion. The Dow Jones Industrial Average closed at a record high of 29,568 on Feb. 12, then bottomed out at 18,213 on March 23, a mere five weeks later! That is a decline of 38%, which is actually normal when studying the declines of previous bear markets. What is not normal is that the average bear declines that much over a 1.3 year period as opposed to a 1.3 month period!
What is very normal is that previous bears have often been followed by quick recoveries. We have definitely seen that this time around, at least thus far. As of the market close on May 5, the Dow stood at 23,883, which means that it is presently almost 1/2 of the way back to its previous record. Will those gains hold and even continue to advance? That cannot be accurately predicted.
One important point to remember is that the stock market is often referred as forward-looking and is called a leading economic indicator. A simple illustration will make this point; In mid-Feb. until early March, many of us were eating in restaurants while the Dow was getting doused. Since then, most of us have not been to restaurants but the Dow has been cooking. So it's my opinion that the Dow has for the most part, already priced in the fact that current earnings of many companies in Q2 will be at historic lows. but the outlook for Q3 and Q4 looks much more promising, so that forward-looking aspect is what's fueling the increases we have been seeing since late March.
When economic and business conditions appear trying, it can be tempting to give up. We have often said and wholeheartedly believe this statement; "The easiest thing in the world to do in a declining market it to get out. The hardest thing to do is to get back in."
We are always available for questions and comments.
The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.
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