This is our market alert video for the week ended May 29, 2020, and as it seems every week, is a lot of information; A lot of activity affecting what’s going on. As I record this, of course, the tensions between the United States and China are flaring up, more than they were already, over the Hong Kong situation. And that’s going to have some economic impact, we’re sure. We’ll have to wait and see how it all plays out. But, overall, what I wanted to report to you is yesterday, on Thursday, we had our investment committee meeting. As we stand right now, we are still looking at if we get to our buy signal – which we’re close but we’re actually far away, if that makes sense – if we do reach it, that we are still now, our posture is still that we’re going to tippy toe in. And the major reason behind that is because, at this point, we still don’t have clarity on where all of this is going to go.
So let me explain. We’re about to get second quarter numbers after June ends. And they’re going to be terrible. And I think everybody knows that. Everybody expects the worst economic numbers that maybe have ever been reported in the United States – unemployment, bankruptcies, profits – terrible. And it is our belief that no matter how bad they are, even if these numbers that come in are worse by a long shot than expected, that investors will say, “We knew it was going to be bad.” And therefore, we don’t see a big reaction, no matter how bad the numbers are. Now, if they’re better, we may see a different reaction, but we don’t anticipate that.
So what is, in our view, the market looking at? Well, the market tends to be forward-looking. It doesn’t necessary look at what’s happening today. It’s looking 6 months to a year into the future and saying what does that look like. And I want to invest today based on what I see in the future: 6 months to a year from now. So since the rally that we have been in started, towards the end of March, 6 months later puts it into September, which is the third quarter. Okay? So what that means is that the market appears, investors are appearing, to say that they think that in the third and fourth quarter of this year that things are going to be much better ( the economy will be back on track, people will have jobs back, and profits will be good again, and all will be well). Therefore, the market has risen almost to the levels it was before the pandemic started. Now, we are not so sure about that, and so that’s why we’re still cautious.
The number of bankruptcies is being abated right now by the fact that many people are making more money. We saw a statistic that said that 60% of the people that are unemployed right now are making more money off of their unemployment and the government stimulus check than they were making while they were working. So if that’s the case, then those people are better off right now than they were financially. And so, we haven’t seen the full effect. But can that go on forever? And when it stops, then we’re going to actually see what the real situation is. And that’s our concern.
The other thing, of course, is forbearance on loans and on rents and mortgage payments – 2 months of that. Those will all come to an end at the end of June, unless they are extended. And we talked to an attorney who is in the business of bankruptcies and lawsuits, and they told us that the number of landlords that are considering evictions and foreclosures and all that kind of stuff has skyrocketed for their business, and they’re busily preparing lawsuits and all kinds of things. So all this is pent up, and we think that we need to get into July before we start seeing what the true effect is and whether these measures that have essentially become to gap us over, when they come to an end or wane, what is going to happen after that? And that we don’t have clarity on.
So at this point we’re still very cautious. We do believe it’s very possible that the S&P, the stock market, could fall from here, despite the rally we’ve had. We’ve explained in previous videos that this behavior is standard behavior for major bear markets. The Great Depression, the 70s, the Y2K, 2008 all had rallies very similar to this one. Not as fast. And this one’s different: massive government stimulus. But they’re never the same. But we still have had rallies like this in previous bear markets, so we’re not very trusting of it yet. We want more clarity. So, basically, our view is we want to be better safe than sorry. And especially when it comes to your money and your financial security.
So right now we’re far from our buy signal, but we’re not very far. We could get there in short order if the S&P decides to really shoot up from here. So if we do, 10% of allocation is still our posture. That could change. Again, as data comes in, as we have more clarity, we may change our posture on that, but for now, that’s where we are.
And the other part of this is we thank you for being our client and for allowing us to worry about all this stuff for you so that you don’t have to. We want you to have peace of mind. We want your money to last as long as you do. And everything we do is geared around those two goals. And we will do everything we can to make that happen. Now again, I’m going to plug this because it’s important, in our view. We have a core value that says that our noble obligation is to help as many people as possible – to make a client every day. Meaning we want to help people. And so if you have friends, business associates, family members that you think we could help, please send them our way. We’d love to meet with them and see if there’s a fit for that.
So again, we are forever grateful to be your retirement planner. And we will do everything to have your money last as long as you do and for you to have financial peace of mind. Take care, and we’ll talk soon.