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Market Highlights Q1 2020
Q1 was an E-ticket ride. Not only did the markets drop by more than 20% to wipe away the gains of 2019, but the change happened so quickly that investors struggled to catch their breath on the way down. According to the VIX volatility index, it was the fastest, steepest ride in stock market history, complete with record losses, followed immediately by record gains, over and over again.
In Q1, every index saw some level of decline. The Russell 2000 index of smaller, more vulnerable companies had the largest three-month fall, closing the quarter down nearly 31%. The Dow index that measures the performance of the largest 30 companies suffered its worst quarter since 1987, while the broader-based S&P 500 hadn’t seen a quarterly decline of this magnitude bad since 2008. The Nasdaq fell more than 14%, and the Global Dow fell over 24% for the quarter.
Facts and figures don’t ease the gut-wrenching feeling of falling markets, but perspective may help. The S&P declined 20% since the December 2019 close, but the index was 2485.74 at the end of December 2018. The change in the S&P over the last 15 months has been a net gain. For investors, the key is to maintain perspective and stay your course.
As social distancing, widespread closures of most non-essential businesses, and stay-at-home orders continue, it’s impossible to predict the full extent of business disruption or the impact on the US and global economies. With so much of our economy shut down until further notice and temporary unemployment rising to historic levels, we expect a recession in the first half of 2020.
The new CARES Act will help. A stimulus initiative, CARES provides about $2.2 trillion in aid to help jumpstart the economy by increasing the ‘velocity of money’—or the rate at which money in circulation is used to purchase goods and services. Many of you have said you don’t need the money and feel a moral restraint about accepting it. But a healthy economy requires you to spend, so take it and use it well by spending on goods and services for yourself, to support those who rely on your business, and to assist the people you love. Of course, if you do need the money, it is a great way to help bolster your emergency fund.
Staying safe and staying well should be your #1 priority. During markets like this, we do our best work as your advisors, working tirelessly to monitor your investments, assure liquidity, tax-man- age your investments, and adjust your plan. Optimism may be a challenge on this E-ticket ride, but do your best to stay positive and remember that “failure is not fatal.” If you need help keeping your safety belt fastened until the ride comes into the station, we are here to help.
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