TrustWell’s Quarterly Market Review: Q3 2020

By Brett Freese

Market Highlights:

• Stocks had a strong 3rd quarter. Interesting note: US Large Cap stocks outperformed US Small & Mid Cap, and Emerging Markets outperformed International Developed Markets over the last 13 weeks
• Corporate Bonds, Short-Term Government Treasuries, Municipal Bonds, and World Bonds were all positive
• Gold had another strong quarter with a 9.75% price per ounce growth rate

Economic Notes:

• The world is still in recovery mode from the deepest (and likely the shortest) recession in history.
• COVID-19 fears/precautions have caused people, businesses, and governments to shut down many parts of the economy since March. Many of the local small businesses are closed for good.
• Unemployment numbers remain high but well off the lows of the year.
• The Federal Reserve kept the Federal Funds rate target range to a historic low of 0.00 – 0.25% and have stated that they are willing to tolerate above target inflation for longer to make sure the economy improves. Note: The Federal Reserve has a dual mandate to achieve both stable prices and maximum sustainable employment
• Even the most optimistic economists and Institutional Investors did not predict the strength of the market’s upward movement since the devastating declines in March.
• Core inflation should remain below 2% in the short to medium term.
• Political uncertainty likely will lead equity markets to be both choppy and range-bound through year end.

Historical Stock Market Declines:

Market declines and inclines rarely look the same or even feel the same, but they do happen and the ups and downs are a part of the process – It is important to have a plan/strategy so emotions don’t dictate buying or selling.

A 5% or greater loss occurs about 3 times a year
A 10% or greater loss occurs about once a year
A 15% or greater loss occurs about once every 2 years
A 20% or greater loss occurs about once every 3.5 years

Please know that when stock prices go down the “market collapse gurus” receive the most air time. Likewise, when stock prices go up all the “bull market gurus” talk about how the market will continue to be up BIG. Please know that most “gurus” are great with hindsight to justify how important it is to have their voice heard.

Market Scorecard for the last 13 weeks ending 09/30/2020:

US Equities:
+8.93% S&P 500 (Index of the largest US publicly traded companies)
+6.21% Russell 2000 (Index of 2000 Small-cap US publicly traded companies)

Global Equities:
+6.27% Foreign Large – Morningstar Category
+10.39% World Small/Mid Stock – Morningstar Category

US Bonds:
+2.02% Corporate Bond – Morningstar Category
+0.21% Short Government – Morningstar Category
+1.47% Muni National Bond Index – Morningstar Category

Other:
+3.00% World Bond – Morningstar Category
+9.75% LBMA Gold Price

Market Indicators:

Inflation:
0.99% as of 09/02/20 (Up 0.66% from 0.33% in June)

Unemployment:
8.4% as of 09/4/20 (Down from 13.30% in June)

Fed Funds Target Rate:
0.00 -0.25% as of 09/25/20 (Same as 06/26/20 of 0.00 – 0.25%)

Suggested Next Steps:
• Understand that market cycles are normal. The markets go up and down in mostly unpredictable directions and amounts. The ups and downs of investments many times seem to make sense only after they happen, however, market prediction is very difficult. (i.e. the next stock market crash has been predicted every year since 2008).
• Your investments are just one factor in the success of your life, money, and purpose. Make sure that you are confident in your full financial plan, so you can successfully have an amazing ROL (Return on Life).
• Your investment allocation and diversification are important factors in both risk management and future returns. Therefore, if you have questions about your investment plan, please schedule a phone or in-person meeting with your TrustWell Financial Advisor(s).