Happy Saturday,
Investors sold stocks this past week as they reacted to economic data and assorted reports on Covid-19. The economic data was bad but expected. Retail sales fell 16.4%. The previous low was negative 3.67% during the Great Recession. Manufacturing output fell by 13.7%, the most significant decline since 1919.[1] Industrial production dropped 11.2%.
The market was also startled by Federal Reserve Chairman Jerome Powell’s comments when he said the economic outlook is still “highly uncertain and subject to significant downside risks.”[2] And one billionaire hedge fund manager said, “this is the second-most overvalued market, behind only ’99.”[3] But he also purchased shares of Twitter, Microsoft, Wells Fargo, Micron, Netflix, and Energy Transfer LP.[4] Do as I say, not as I do?
Bankruptcies continue to pile up, including J.C. Penney’s, Frontier Communications, Gold’s Gym, True Religion, Ultra Petroleum, and Diamond Offshore.
The House passed a $3 trillion Coronavirus Relief Bill.
Tesla will build its next factory in Austin, Texas – Hook ‘em!
Consumer confidence rose this week.
The number of air travelers has increased by 160% since the April lows, according to the TSA website. As one client mentioned to me, “He can’t wait to drink a beer in a crowded airport.”
OpenTable® restaurant reservation data continues to improve.
Here is how stocks, bonds, and alternative asset classes performed this past week.
- The S&P 500 fell 2.33%%
- The NASDAQ fell 1.05%
- Small-Cap Stocks fell 7.56%
- Real Estate Stocks fell 7.76%
- International Stocks fell 3.15%
- Emerging Markets fell 2.03%
- Bonds rose .47%
- Gold rose 2.19%
- Energy Stocks fell 6.79%
Captain Lawrence G. Getz III is the Commanding Officer of the University of Michigan’s Navy ROTC program and a Navy helicopter pilot. He flew more than 2,500 hours, including 500 combat hours. For his service, he earned the Defense Superior Service Medal, Legion of Merit, and two Meritorious Service Medals, to name a few. I recently asked him how he dealt with his emotions while flying. He said, “Compartmentalize your emotions, put them in a box, and execute your plan. Being afraid is normal, but do not make emotional decisions in highly volatile times. Do not make decisions in fear.”
We should follow Captain Getz’s advice. Reacting to fear and emotion can have long-term consequences for your family’s wealth. It’s imperative to follow your plan and focus on your goals. Difficult times will fade, and the stock market has always recovered. I sound like a broken record, but the poor stock market performance has not harmed our client’s financial plans. Be strong and keep the faith.
“Great things never came from comfort zones.” ~ Anonymous
Have a great weekend!
May 16, 2020
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and are not suitable for every investor.
[1] https://www.wsj.com/articles/coronavirus-lockdowns-trigger-record-spending-drops-on-shopping-eating-out-11589535000?mod=hp_lead_pos1, Harriet Torry, May 15, 2020
[2] https://markets.businessinsider.com/news/stocks/negative-interest-rates-not-considered-federal-reserve-policy-jerome-powell-2020-5-1029198208, Ben Wick, May 13, 2020
[3] https://www.cnbc.com/video/2020/05/13/david-tepper-this-is-second-most-overvalued-market-behind-only-99.html website accessed May 15, 2020
[4] https://whalewisdom.com/filer/appaloosa-management-lp#tabholdings_tab_link, website accessed May 16, 2020