Market Update: Jul 30 2020
- Market Expectations
- Commercial Real Estate
Here is a recap of our live Q&A session held on 7/30/20 presented by Joe Randazzo JD, CFP® from FNA Wealth Management and Dave Stone CPA, CFP® from Tartan Wealth Management.
Details for our next session, August 6, can be found here.
What are your expectations for the stock market over the coming weeks?
We have seen the market continue down the path of the big tech companies driving returns this year. The NASDAQ has been setting records hovering above the 10,000 mark since 6/30/2020 for the first time in history. The growth vs. value spread is getting wider each week over the last month. It appears that investors have looked upon the big tech names as their safe investment. When economic news is less than favorable the big tech and the “stay-at-home” stocks we have discussed have led the market.
These are the things to watch over the next few weeks:
- Earnings announcements for the big tech companies…WILL INVESTORS SELL THE NEWS?
- COVID 19 cases on the rise in numerous states. Will states go back to lock-down mode? Phase 3 of vaccines and progress toward a vaccine by end of year.
- What will the new stimulus package look like and when will it get done?
- Will growth vs. value difference continue to widen?
- Gold prices at all-time high and dollar weakness.
- 100 days from 2020 election.
These are only a few of the issues that could impact the markets and create more volatility over the coming months. We think it is likely that the market could pull back 10-15% over the next few months. Therefore it is recommended if you are investing, to continue to dollar cost average in to the markets.
How do you feel about commercial real estate?
Our opinion is that commercial real estate is an asset class that is unlike no others due to the fact that not all real estate will react the same in different parts of the country. For example, apartments in NYC will have very different pricing dynamics than apartments in suburban Columbus. Real estate is like the weather…it is different in all parts of the country.
There is no question that there is pressure on certain types of real estate including office buildings, hotels, and retail stores. It appears there will be a major transformation in these types of real estate and likely a lot less of it will be necessary as people change how they work, travel, and shop. We believe that warehouses and suburban apartments should withstand major real estate downturns in the coming months and years.
The views and opinions expressed herein are those of the author(s) 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.
The NASDAQ is an index that tracks the cumulative results on a market capitalization basis of all stocks trading in the NASDAQ system.
Growth funds focus on companies that managers believe will experience faster than average growth as measured by revenues, earnings, or cash flow. While growth funds are expected to offer the potential for higher returns, they also generally represent a greater risk when compared to value funds. They tend to do better than the overall market when stock prices in general are rising, while underperforming the market as stock prices fall, taking into account that past performance does not guarantee future results.
The goal of value funds is to find proverbial diamonds in the rough; that is, companies whose stock prices don’t necessarily reflect their fundamental worth. In searching for these companies, managers look for what many experts call a “margin of safety.” This means that the market has discounted a security more than it should have and that its market value, the price at which it is trading, is less than its intrinsic value, the present value of its future cash flows. In general, value funds focus on perceived safety rather than growth, often investing in mature companies that are primarily using their earnings to pay dividends.
A plan of regular investing does not assure a profit or protect against loss in a declining market. You should consider your financial ability to continue your purchases over an extended period of time.