Market Update: Jul 16 2020
- Market Expectations
- US-China Trade Relations
Here is a recap of our live Q&A session held on 7/16/20 presented by Joe Randazzo JD, CFP® from FNA Wealth Management and Dave Stone CPA, CFP® from Tartan Wealth Management.
Details for our next session, July 23, can be found here.
What are your general thoughts going into the second half of 2020?
- Given the continued run and resiliency shown, I believe markets are at greater risk of pulling back on negative news
- In the short-term, I think we are due for pullback. Markets seem to be ignoring the negative headlines related to COVID cases, earnings, etc
- I do believe market lows seen in March will not be revisited but, that said, we are likely still many months away from sustainable recovery
- Because of that, I believe it is too early (or too late?) to pursue additional risk, but investors should stay the course if they can
- Rising bankruptcies is a concern if the virus keeps going. The stimulus was effective, but has not increased demand for deprived businesses from what we can tell. A total reclosing of the economy would likely be catastrophic and we do not believe it is currently priced in to markets
- So far, the Presidential election is too close to call. If Biden takes sizable lead, we will likely see a bigger focus on the markets. We also feel Congressional election outcomes are as important as the Presidential outcome. We expect the market may experience additional volatility as we approach the election.
- If there is a change in the White House, I think there will be greater potential for large increases in personal capital gains taxes, corporate tax increases, and additional business and environmental regulations.
- As for investment themes, some low quality stocks are cutting dividends and we may be seeing the beginning of a shift to a higher-quality approach.
What impact do you see China having on the economy for the rest of the year?
Trade relations between China and the United States are a prominent concern in the second half to this year and beyond. Relations are decaying and rhetoric has been hostile. There could be an economic trend rising of supply chains closer to developed nations. As a whole, however, there is a great amount of interdependence on each other and rhetoric might stay hostile, but there could be limited policy action because of the mutually beneficial relationship that has been established in relation to trade.
The views and opinions expressed herein are those of the author(s) and date noted and may or may not represent the views of Capital Analysts or Lincoln Investment. The material presented is provided for informational purposes only. Nothing contained herein should be construed as a recommendation to buy or sell any securities. Past performance is no guarantee of future results. No person or system can predict the market. All investments are subject to risk, including the risk of principal loss. There is no guarantee that any strategies discussed will result in a positive outcome. You should discuss any legal, tax or financial matters with the appropriate professional.