By the Shone Wealth Management Team
Over the next month, we will be publishing weekly write-ups that will give you updates on the markets and actions we are taking on behalf of our clients.
Below, you will find a recap of the latest news you should know, plus what to watch out for as we head into the week.
When markets closed on Friday, March 20, the S&P 500 had lost roughly 30% of its value from its February 19 peak, and suffered its worst one-week decline since 2008. It had all but wiped out all gains accumulated under the Trump administration. At the time, there was a Senate stimulus bill largely expected to pass over the weekend. The Fed had already cut interest rates to 0% and announced rescue measures around its bond-buying program to the tune of $700 billion.
But the market took a turn for the better last week, as the major indexes rallied for one of their best weeks ever. The S&P 500 posted its biggest three-day gain since 1933 and recorded its best week since March 2009 — just one week after its worst week since October 2008. The Dow turned in its best weekly performance since 1938. Despite paring some of their gains on Friday and finishing the session in the red, the S&P 500 gained 10.3% for the week, while the Dow gained 12.8%. Investors who attempted to time the market would have had a rough week.
There were, of course, fiscal and monetary policy measures taken to stem the downward tide and ease investors’ fears. After two failed votes, the Senate passed a $2 trillion stimulus bill (full details below). The Fed announced last Monday morning that there would be no limits to its bond-buying program, which had originally been capped at $700 billion, and announced new credit facilities, expanded liquidity pools, and the launch of a “Main Street Business Lending Program.”
Looking back on the last two weeks, it may be that this correction has already priced-in a sharp recession and economic distress, leading to lower expectations for consumption, production, and growth. It may also be the case that these are short-term fluctuations, as markets handle uncertainty and reassess expectations. We don’t speculate because we can’t predict what the future holds.
We don’t know for certain how long the COVID-19 crisis will last, and we don’t know how the market will react to negative — or positive — news that arises from it.
Emotions are high, anxiety is prevalent, fear is palpable — these are all normal feelings. But there is a solution to ease the mental toll of the unknown, especially when it comes to your financial picture and creating solid outcomes over time. This is what we have been doing over the last two weeks, when it comes to your investment experience:
When it comes to your investment portfolio, there are three main ways we are accomplishing the rebalance:
1. Using additional cash that has been sent to us.
2. Adjusting what we sell to raise cash needed for monthly distributions. We would currently sell fixed income and not stocks.
3. Implementing a broader-based rebalance once the bond markets calm down.
We continually monitor all these factors for the best course of action.
This is also a good time to go through your financial health checklist:
1. Assess your job status and cash flow.
2. Balance your emergency fund and any large expenses expected in the next 6 months.
3. Plan ahead for any updates to your goals/objectives and how those relate to the construction of your portfolio.
After a unanimous vote in the Senate, the House gave final approval Friday on the largest stimulus bill in modern American history. It is the latest legislative effort designed to bolster the U.S. economy during the ongoing Coronavirus pandemic.
Here is a breakdown of the bill for individuals, businesses, state and local governments, and hospitals:
For Large Businesses:
For Small Businesses:
For State and Local Governments:
We can assume that there will be periods of volatility moving forward and that more changes are in store on the economic and policy fronts. We are committed to updating you on the factors that impact your day-to-day life and financial situations. If you have any questions or simply would like to discuss some of your concerns about our current environment, please contact us by email or by calling (925) 472-0874.
We appreciate and take very seriously the trust you have placed with us.
Your team at Shone Wealth Management
The S&P 500 is a market capitalization-weighted index that tracks the 500 largest companies listed on the New York Stock Exchange or NASDAQ Composite. It is used as a benchmark of the overall stock market’s performance.
Return data represent past performance and are not indicative of future results. Historical performance does not reflect applicable transaction, management or other applicable fees as noted, the incurrence of which would decrease hypothetical, historical returns.
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