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Market Highlights Q3 2020
As we address the public health aspects of recovery, the economy continues to recover from the Coronavirus recession. The Fed says it has used all its tools for monetary policy actions and says it is time for Congress to implement fiscal policy. The House has passed a $2.2 trillion stimulus bill, but it is unlikely to pass the Senate. I hope that our representatives can see the actions through the lens of Modern Monetary Theory and enlarge their thinking about deficits. Unemployment is at 8.4% and still far above the pre-pandemic level of 4.9%. In a consumer-driven economy, the fact that 13.6 million Americans are out of work makes a quick recovery unlikely. Further confounding the recovery is the paradox of thrift; consumer spending is down over 10%, and the savings rate about 17%—a dramatic shift from the 6-7% average savings rate in 2015.
Overall, stock market indexes show strength. But when the indexes are disaggregated, two factors have contributed to the seeming mismatch between the economy and the markets. Upon closer examination, we see two main drivers of market growth: the tech sector and stronger/larger companies. As consumption patterns change (such as less travel and dining out), the demand for technology has risen (think Netflix and Zoom). Therefore, you might ask, why buy smaller companies? But you already know the answer, right?
There’s a lot of uncertainty ahead, so be prepared for a rocky ride in the stock markets in Q4. To help ensure that your long-term outlook is not adversely impacted, we are here, always. We monitor your investments, ensure a level of liquidity that meets your needs, and apply strategies to keep your taxes as low as they can be. As we head into the final quarter of 2020, stay optimistic, keep looking forward, and if you have any questions or concerns, know that we are here to help.
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