Letter from Our Founder
June 2020
Why is the Market Up when Main Street is Struggling?
Let’s Look Long Term.
How long is the recovery likely to take?
Hello:
This is the second Monthly Newsletter. We hope you will find it both informative and entertaining. It will include a short golf fitness video.
As I write this letter in mid-May we have come a long way from the markets bottom on March 23. So why has the market been up when Main Street is closed? The answer is the market attempts to look ahead about 12 to 18 months into the future and it is saying we will come out of this sooner versus later. While there are huge numbers of Bearish voices out there, so far, they have mostly been inaccurate.The American Association of Independent Investors (AAII) investor sentiment survey on 5-13-2020 showed 50.6% of their investors were bearish about the next 6 months in the market verses their historical average of 30.5%. The market does not share their view.
Let us remember we chose to close and self-isolate to slow the spread so the health care system would not be overwhelmed. For the most part we have done this as hospitals are not currently seeing huge numbers of Covid-19 patients. Plus, the economy is starting to open, and this is encouraging to the market.
As of early morning, on 5-28-20, we are experiencing volatility in the market with the S&P 500 index reaching new highs since the March 23 bottom. But the S&P 500 is only about 6% higher than we hit on April 29. The point here is we should try to look just a little bit longer term as the daily ups and downs can bring on anxiety.This brings us to the question of how long the recovery will take. While no two market events are exactly the same, on May 13, 2020 Bob Dickey of RBC said this Market Event will most likely look more similar to the 1987 Market Crash than it will to 2008 at 1929. This would mean we are very likely to have a significant recovery in the next 12-18 months as the economy starts to open, like we saw after 1987.
Stay well and know we are here to answer your questions and concerns. We thank you for your trust and for sharing our contact information with your friends and family members. Your referrals are appreciated and the best compliment we can receive.
Roger P Tennyson CFP®
714-397-2906
843-422-7532
roger@twealthinv.com