Emotional investor reaction to news headlines drove the wild market fluctuations we saw in the first half of the year. Investors should expect volatility to continue, with an election taking place during the ongoing pandemic and re-opening of the economy.
Investors have recently focused their attention on the foreign exchange and precious metals markets, trying to interpret the signals that the U.S. dollar and gold prices are sending. These markets indicate worry about expansionary monetary and fiscal policies.
The COVID-19 pandemic has taken a toll on many individual lives. The widespread economic disruption is unlike any environment investors have seen in their lifetimes. This Investor Q&A shares insights and ideas to help investors manage through these difficult times.
The technology sector has been the primary catalyst for the recovery, now accounting for a record 38% of the S&P 500 (higher than the 33% seen in 2000), with the top-five names accounting for a record 22%. We have seen a recent broadening of leadership, however, with strength in small caps, value and emerging markets.
The S&P 500 IndexTM has a positive total return of 1% this year despite an estimated decline in GDP of 5% and earnings of 22%. Equity markets tend to lead economic recoveries, but also tend to see exaggerated swings based on emotion.
At the start of this year, the bond market’s view of the economy was more consistent with recessionary conditions. More recently, however, interest rates have hovered at near record lows even as economic data suggested improvement.
