Broker Check

IM Wealth Partners Q3 2020 Market Update

August 28, 2020

In light of the upcoming election, we thought it would be pertinent to provide you with an overview of the current economic situation.  Below the executive summary, you will find greater detail.

Executive Summary

  • The S&P 500 achieved a record high close on Tuesday, August 18th, highlighting a remarkable rebound since the March pandemic lows.
  • A handful of mega-tech stocks like Apple and Amazon have led the charge in stock returns.
  • Since the onset of the global pandemic, developed economies have rebounded or stabilized but only China and U.S. stock markets have returned to positive territory.  Future opportunities may exist in some international markets.  
  • Interest rates are the lowest they have ever been, whether we measure in terms of corporate bonds yields, US Treasury yields, or 30-year mortgage rates. Low-interest rates and easy money may power strong growth.
  • On top of pandemic concerns, it’s also an election year. Over the past 90 years, stock returns have often favored Democratic presidents but more recent results have been mixed.
  • Negotiations over an additional coronavirus stimulus bill are gridlock in Congress and likely postponed until September.

Supplemental Commentary:

A Record Recovery To Record Highs

The S&P 500 stock market closed at its highest level ever Tuesday, August 18th, capping a remarkable rebound fueled by unprecedented government stimulus and optimism among investors about the world’s economy to bounce back.  In addition, this recovery to a record high was the quickest one on record.

Mega-Tech Leads The Charge

The spectacular recovery in the stock market since the March lows has been led by a handful of mega-tech companies.  The chart below puts into perspective the handful of these companies whose market capitalization and stock returns have led the way.

Apple is King of The Mountain

Specifically of note, shares of Apple reached $467 per share positioning them as the first U.S. public company to hit $2 trillion in market capitalization. 

International Opportunities Await

Chinese and U.S. stock markets have recovered and even moved into positive territory year to date.  Other international stock markets are catching up but still in negative territory during this time period.  This presents some opportunities for diversified sources of returns.

Low Rates To Boost Growth

Interest rates are at historic lows, regardless of which sector you look at.  Such a low rate environment and easy money supplied by the Federal Reserve are strong catalysts for future growth.  30-year fixed-rate mortgages for residential housing loans have fallen to historic lows.

Stock Returns By President

With the Democratic and Republican conventions on the calendar, some might wonder which political party has been better for stocks historically.  

Over the past 90 years, economic cycles mattered much more to investors than electoral cycles.  In recent years, the results have been more mixed.  While every election is billed as critical, democracy, capitalism, and a balanced government have likely been a greater catalyst of strong investor returns in the United States. If markets convulse at either outcome in November, it is probably an opportunity. (Source: Seeking Alpha)

Will We Get Another Stimulus Plan?

Lawmakers and citizens alike are growing increasingly concerned that the stalemate over an additional coronavirus stimulus package may not get resolved.  Recent negotiations have reached an impasse and the discussion may be tabled until September.  Any agreement would likely result in a minimum of $1 trillion in relief aid and may have an impact on the markets.