Written by: Ryan Detrick, Vice President, Senior Market Strategist LPL Research
Dear Valued Investor:
Our everyday lives have changed dramatically over the last few weeks as we work together to minimize the impact of the COVID-19 pandemic. We know these efforts are necessary, but they also have come at a cost.
Global economic growth has been slowing, the US economy likely will contract temporarily, and US stocks have entered a bear market. Big stock market moves, both up and down, have become the norm. The yield on the 10- year US Treasury note has fallen to an all-time low, making borrowing cheaper—but challenging savers. In short, this has been a challenging period for many long-term investors, and you’re asking what’s next and what to do.
Despite elevated uncertainty, we’ve been encouraged by the actions of global central banks and governments to support their economies and stock markets through this challenging period. In the United States, the Federal Reserve (Fed) lowered its policy rate by a full percentage point, the first move that large since the savings and loan crisis, bringing the rate to a target range of 0–0.25%. The full impact of lower rates may have to wait until loan demand picks up, but other Fed actions may provide more immediate support to help financial markets continue to run smoothly, bolster short-term funding, and increase market liquidity.
At the same time, the US government already has passed several measures to support the economy, and it’s currently working on a major fiscal stimulus bill of at least $750 billion. Discussions are still taking place, but provisions possibly could include paid sick leave, expanded medical testing, unemployment insurance, direct financial support for consumers, and relief for some of the most heavily impacted industries.
We know it’s difficult to keep looking forward with so much uncertainty and so many unanswered questions right now. But as long-term investors, it’s important that we maintain a clear vision of our financial goals and our plan for getting there.
Market volatility like we’re experiencing now may provide pockets of opportunity in suitable portfolios. As a recession increasingly is priced into markets, stock market valuations relative to their earnings power and to bond yields have become more attractive. Current uncertainty means taking a careful, measured approach, but for appropriate investors there may even be small ways to consider taking advantage of these potential opportunities.
It’s likely we may see an economic rebound later this year and into 2021 as the outbreak is contained, businesses reopen, and fiscal and monetary policy support expands. The US economy and corporate America have steered their way through world wars and cold wars, financial crises, and geopolitical events. Through even the most challenging times, markets have found their way back to normalcy, and investors have been able to look to the future. We believe this time will be no different.
Trust your plan, stay the course, and be well. And as always, we encourage you to contact your financial professional with any questions.
For more information, please contact:
Brent Kalka
CERTIFIED FINANCIAL PLANNER™ | Accredited Investment Fiduciary®
(847) 649-8805
bkalka@muellersolutions.com
Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through IHT Wealth Management, a Registered Investment Adviser. IHT Wealth Management and Mueller Financial Services, Inc. and are separate entities from LPL Financial.
