Still there? Yes. We are here, too, and the coronavirus is still with us, raging. Month four since the COVID-19 pandemic has reshaped our lives from top to bottom. Here in the U.S., a health disaster unfolds as the south and west are facing record case totals and only now implementing the type of precautions that have become commonplace to those of us in the northeast, where thankfully, the numbers look promising for now.
Outdone by healthcare and other essential workers to be sure, it has been a dramatic time on the front lines of global capital markets. Since the virus began spreading worldwide, markets have been roiled, rallied and roiled and rallied again. Stock markets the world over continue to experience record volatility as future economic performance is now uncertain. However, as of this writing, many stock markets have shrugged off the economic impacts of the virus and shutdowns, registering only modest declines since the pre-COVID peak. The technology-heavy NASDAQ market has even achieved a new price record since the short crash. This seems anathema to the news around.
When listening to market professionals speak about volatility, we often hear the term ‘peak to trough’ to describe a market or a specific stock’s, crash. The term refers to the top price level that was achieved (peak) prior to a rapid decline to the ‘trough’, or low point before settling somewhere in the middle, usually. While the recent peak to trough drop was significant, the most dramatic thing that occurred is the ‘trough to peak’ performance of the stock and bond markets, that is, the recovery in prices.
Why has the market recovered so quickly? There are many theories in this regard. One is that the longer we suffer through the pandemic itself, the closer we get to achieving an effective vaccine and returning to normalcy. Another is that the unprecedented support of central banks and national governments will be enough to keep the wheels of capitalism greased with all the liquidity needed to get through. Stock prices are technically a measure of long-term future earnings so maybe investors have finally gone truly long-term in their thinking. The recovery is likely a combination of these and many other factors. We often resort to a ‘look out below’ mentality as a natural instinct in a crisis, but our individual sentiments can sometimes, occasionally, be wrong. We tend to underprice the potential for better news and optimism often comes too late, at least to make money on it. Markets are ‘smarter’ or at least more ‘efficient’
This is not an argument to become more aggressive or increase stock exposure ‘today,’ rather it is an argument on maintaining stock market allocations at reasonable levels through thick and thin. While there may, in fact, be more shutdowns, unemployment, virus cases etc. and the stock market may go back down to uncomfortable levels this year or next, our world will someday return to normal, and valuations along with it. The actual calendar date that this occurs is a mystery to all of us.
As always, we welcome your questions and comments at any time. Best wishes for an enjoyable summer!
Lionshead Wealth Management, LLC is an investment adviser in New York. Lionshead Wealth Management, LLC is registered with the Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Lionshead Wealth Management only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Lionshead Wealth Management 's current written disclosure brochure filed with the SEC which discusses among other things, Lionshead Wealth Management's business practices, services and fees, is available through the SEC's website at: www.adviserinfo.sec.gov. Past performance is not an indication of future results. Please note, the information provided in this document is for informational purposes only and investors should determine for themselves whether a particular service or product is suitable for their investment needs. Please refer to the disclosure and offering documents for further information concerning specific products or services. Nothing provided in this document constitutes tax advice. Individuals should seek the advice of their own tax advisor for specific information regarding tax consequences of investments. Investments in securities entail risk and are not suitable for all investors. This is not a recommendation nor an offer to sell (or solicitation of an offer to buy) securities in the United States or in any other jurisdiction. This document may contain forward-looking statements relating to the objectives, opportunities, and the future performance of the U.S. market generally. Forward-looking statements may be identified by the use of such words as; “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of any particular investment strategy. All are subject to various factors, including, but not limited to general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting a portfolio's operations that could cause actual results to differ materially from projected results. Such statements are forward-looking in nature and involve a number of known and unknown risks, uncertainties and other factors, and accordingly, actual results may differ materially from those reflected or contemplated in such forward-looking statements. Prospective investors are cautioned not to place undue reliance on any forward-looking statements or examples. None of Lionshead Wealth Management or any of its affiliates or principals nor any other individual or entity assumes any obligation to update any forward-looking statements as a result of new information, subsequent events or any other circumstances. All statements made herein speak only as of the date that they were made.