August 1, 2020
Like many of you, we are also looking forward to the cooler weather of fall. August heralds the beginning of earnings season for many companies. Although many companies will undoubtedly show a drop in earnings, it is the future guidance that really commands our focus. We expect guidance to be cautiously optimistic particularly for those companies who were able to quickly adapt to the technology needed to work remotely during the height of the pandemic.
So far 2020 has been a surreal time for investors with constant gyrations and a contraction in economic activity due to COVID 19. Fortunately, the worst of the recession is likely over, and progress in the U.S. recovery is tentative and uneven amid information on new virus cases. With a vaccine being fast tracked through the FDA process, we expect the gyrations to continue for the year.
Beyond what has already been implemented through stimulus payments, historic monetary and fiscal response may be needed to avoid a significant fiscal drag on the economy. The second round may not be as significant as the first but will cushion the economic impact for those who really need it.
Policy actions address the near-term deflationary shock, but they might presage a long-term regime shift.
China's domestic recovery is reportedly ahead of the rest of the world, particularly its industrial activity. Tentative signs of economic stabilization warrant a relatively neutral near-term asset allocation positioning with potential opportunities in non-U.S. assets, U.S. value equities, and TIPS.
Again, the Dow 30, S&P 500 and Nasdaq all had a positive month posting gains of 2.7%, 6.1% and 7.3%, respectively.
Year to date only the Dow remains negative at -7.39% while the S&P 500 and Nasdaq are positive 1.25% and 19.76%, respectively. The 10-year Treasury is currently yielding 0.54%.
*Disclaimer: This report is a publication of Marchand Faries Financial Management, Inc. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgement of the author as of the date of publication and are subject to change.