The last few months have been unsettling to say the least. As the stock market tumbled 30% in March, investors struggled to find a reason to be optimistic. April brought a recovery from the March lows as domestic small company stocks led the way with their best monthly performance in almost a decade. Big picture: global equity markets took three steps backwards in March, one step forward in April, and have treaded water through the first half of May.
As the economy begins to reopen, one question on everyone’s minds is, “What happens next?” Americans are currently adjusting to a new normal that will hopefully come to an end with the successful development and implementation of a vaccine. Until then there are several uncertainties, from the risk of a second wave of COVID-19 cases to the economic pain of the 14.7% unemployment rate reported in May. Uncertainty is ever-present and continues to impact all areas of the economy, from travel and leisure all the way to medical and dental practices. Few industries were spared from effectively shutting down for two months.
So, what does happen next? Yogi Berra famously said, “It’s tough to make predictions, especially about the future.” We agree with Yogi, while also considering what historical data tells us to anticipate moving forward. Short-term, markets will fluctuate following a 30% downturn, as uncertainty will wane some weeks and increase in others. The volatility can be stomach-turning, but it is part of the long-term recovery process. Speaking of long-term, historical data tells us that recoveries can happen quicker than most people anticipate, even when the downturn is as sharp as the 30% drop observed in March.
In short, timing the market is hard: the best times to invest are highly correlated with the most difficult times to stay invested. The cause of this market decline is certainly unique. However, if the past is any indication of the future, this downturn will eventually come to an end and give way to new market highs.
It’s not easy to remain patient and stick to your long-term plan during times of unease. If you have questions about your investment strategy, or if there have been changes to your personal situation, please contact your RCG advisor. We’re here to help.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. Indices are not available for direct investment; therefore their performance does not reflect the expenses associated with the management of an actual portfolio. The index returns above assume reinvestment of all distributions. This information is for educational purposes only and should not be considered investment advice or an offer of any security for sale.
