We want to reach out to you and share our perspective on the current unprecedented market recovery and the general state of the economy. We believe there is a disconnect between Wall Street and Main Street. Stock indexes have recently touched new highs erasing the losses created during the coronavirus sell-off earlier this year. On the other hand, more than 31 million people are receiving some form of unemployment benefit and barely have enough cash to make it through the month. This is in contradiction with the historic rise and recovery in the stock market.
Our objective is to make prudent investment decisions for our clients based on economic data and facts. It is also important to manage the risk and the downside, the returns will then take care of themselves over time. Here are some of our thoughts:
A handful of technology stocks with large market capitalization have driven the benchmark returns to new highs ignoring the sectors and industries in distress due to the pandemic. Based on the research we read, the strong upswing was neither anticipated, nor is it justified.
The election results and the drama that follows may swing the market in an unpredictable direction.
The availability of a COVID-19 vaccine and its effectiveness is uncertain. The impact of the on-going pandemic on the economy is pending and cannot be predicted.
We have faith in the long-term markets but remain unsure of the short-term markets. We are optimistic about businesses learning to operate differently under the current environment. As a consumer-based economy, economic numbers should improve as businesses continue to open up. However, we also need to be prepared for setbacks should new virus outbreaks flare-up, especially given all the schools/universities opening up.
We believe it is wiser to be wrong on the upside than to be overexposed to the downside.
We are focusing on all of our client’s portfolios in reallocating where necessary and applicable. We are also in the process of having adequate cash reserves in the portfolio to prepare for future distribution needs. Please let us know if your income needs have changed.
We hope and pray for your health and safety. We are confident this difficult time shall pass soon.
Minoti H. Rajput, CFP®, ChSNC
Mehul S. Mistry, CFP®, ChSNC
Elinor K. Ho, CPWA®, ChFC®, ChSNC