Stock Market Commentary July 2020
Market Commentary
The ongoing Covid pandemic affected the market, both higher and lower, in June. In our last market commentary, we said the probability of a short term pull back was very high and just a few days after our commentary was posted, from June 8th until June 11th, the DOW Jones dropped nearly 9%, and then again from June 23rd to June 26th, the DOW Jones dropped about 5% (Source: https://finance.yahoo.com/quote/%5EDJI/history?p=%5EDJI). In both cases, the market recovered eventually and ended the month with a slight gain, but it was a wild ride. We’re still quite a bit ahead of the DOW in our in-house managed portfolios year to date but we were slightly negative for the month because of the volatility.
When you take a step back and look at the social unrest, spiking Coronavirus numbers in many states, and a corporate earnings season approaching that will almost certainly be dreadful, you’d think the market would be in a tailspin downward. The Federal Reserve has been committed to Quantitative Easing (QE) for about 3 months now. QE was last used during the financial crisis in 2009. The simplest description is that the Federal Reserve prints money and then buys stocks and bonds with it. This helps to provide stability to the markets, because you have a constant buyer coming in. Because of this, by many measures, this is once again the most overvalued market in 80 years. Corporate earnings have dropped because of the shutdowns related to Covid, so Profit/Earnings (P/E) ratios are dangerously high. Stocks are not a good value by historical standards, but that doesn’t mean they cannot keep going up, so we’re continuing to digest that.
Our portfolios are currently set to own more stock relative to the past few months because our research said a short term surge up was very likely and we wanted to take advantage of it. We ended the month very strong because of this. However, in the coming weeks, Wall Street companies will share their Covid altered earnings numbers for the second quarter. Because of this, the probability of a short-term pullback has increased dramatically in the next month or two once again, and we hope to sell a portion of our stocks for a nice profit very soon. With the election coming up soon, that may add volatility as well.
You trust us with your retirement savings, and we believe riding markets up and down as much as 10% in a single day is not what you signed up for. A big mistake can be the difference between retiring early or working extra years. It can be the difference between running out of money before end-of-life and the long term care costs that come with it, or keeping your pride, dignity and not being a burden to your family. We will continue to be patient as we navigate this “once in a hundred year” pandemic. We managed the financial crisis in 2007-2009 extremely well and we plan to navigate this difficult time as well with patience and prudence, and so far our experience is paying off.
If you have any questions about taxes, your individual investment portfolio, our 401(k) recommendation service, or anything else in general, please give our office a call at (586) 226-2100. Feel free to forward this commentary to a friend, family member, or co-worker. If they would like to receive this commentary in the future, please send us an e-mail at [info@summitfc.net](mailto:info@summitfc.net) at your earliest convenience. If you have had any changes to your income, job, family, health insurance, risk tolerance, or your overall financial situation, please give us a call so we can discuss it.
Thank you for your confidence and referrals!
Bob, Ken, Jim, and Zach Summit Financial Consulting
Interesting Points Since 2000, China’s economy has roughly quadrupled in size, but its debt has increased by a factor of twenty-four. Source: \-Zeihan.com, May 15, 2020
With global call centers closed, Americans only received 2.9 billion robocalls in April which is down from 4.8 billion in February. \-PRNewswire, May 6, 2020
Because of the stay-at-home order, California highway police say that overall traffic levels are down 35% from last year. However, the number of speeding tickets for driving faster than 100 mph has increased 87%, with one motorist caught doing 165 mph. Source: \-Los Angeles Times, April 22, 2020
At least 89 coronavirus vaccines are under development around the world, with seven now in human trials. Pfizer says that if its vaccine proves safe and effective, it might be available on a limited basis as early as September. The most quickly developed anti-viral vaccine to date was the one for mumps, licensed in 1967 after four years of research. Source: \-International Business Times, April 30, 2020
Colleges in the United States earn roughly $600 billion per year- equivalent to the combined annual revenue of the tech firms Google, Apple, Microsoft, Facebook, Netflix, and Twitter. \-The Wall Street Journal, June 18, 2020
Last month, Elon Musk, who takes no salary from Tesla, earned a performance payout worth roughly $775 million. Musk received 1.7 million Tesla shares to bump his ownership stake up to 20.8%. Source: \-CNBC, May 28, 2020
After going public last week, the peak market value of the little-known electric-truck startup Nikola Corp was $30 billion- higher than Ford’s valuation of roughly $24 billion. Nikola has yet to sell any vehicles. Source: \-The Wall Street Journal, June 9, 2020
There are roughly 91,000 dams in the United States and in 2025, 70% of those dams will be more than 50 years old, and currently, 8,000 are over 90 years old. \-National Geographic, May 27, 2020
Notes & Disclaimer: Stock market indices, like the S&P 500 Index, are unmanaged groups of securities considered to be representative of the stock market in general or subsets of the market, and their performance is not reflective of the performance of any specific investment. Investments cannot be made directly into an index. Historical returns data are calculated using data provided by sources deemed to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, or correctness. This information is provided “AS IS” without any warranty of any kind. All historical returns data should be considered hypothetical. Past performance is no guarantee of future results.
This communication is only intended for recipients who reside in states where our agents are licensed to sell these products. Investment advisory services are offered through Summit Financial Consulting, LLC, an SEC registered investment advisor. Registration does not imply a certain level of skill or training. Summit Financial Consulting Investment Advisor Representatives do not render tax, legal, or accounting advice. Insurance products and services are offered through Summit Financial Consulting, LLC. Note: Please update Summit Financial Consulting, LLC, if your investment objectives have changed or if the personal or financial information previously provided has changed. The investment advisory disclosure document that describes Summit Financial Consulting investment advisory services account is provided to you annually. Please consult Summit Financial Consulting for a copy of this document should you need an additional copy. All guarantees are subject to the claims paying ability of the issuing insurance company. Past performance cannot predict future performance. It is not possible to invest directly in an index. The Sherman Group, LLC is not associated with Summit Financial Consulting, LLC in any way, other than a research sharing partnership. Back testing is more heavily scrutinized than any other type of investment analysis because it can be updated to take advantage of past data. The algorithms and trading signals that we receive from the Sherman Group, LLC were created using back testing with the goal of creating a sustainable research process. We have reviewed data from the entire 20 year period which was mostly back tested, and have also personally reviewed the live data for the past 5 years and feel comfortable with it, but we encourage you to meet with us and ask questions so you are fully informed on what we plan to do with your investment assets at TD Ameritrade. It is important to look at fees, taxable repercussions, and trading frequency when looking at a rate of return number. There is no perfect system or research feed, and Sherman Group, LLC has had both longer term and short-term periods where they lost money. Investing involves risk, and these portfolios are no exception.
Ken Wink
Kenneth “Ken” Wink is the Co-Founder and Chief Compliance Officer of Summit Financial Consulting, LLC. With over 22 years of experience in the financial services industry, he is deeply knowledgeable and passionate about explaining complex financial concepts in understandable terms. Ken’s passion for simplifying complex financial concepts began early. While still in high school, he honed his skills by assisting classmates with their tax returns. This led him to pursue a B.A. in Finance at Michigan State University, graduating with honors. He further bolstered his qualifications by obtaining numerous financial licenses, including Series 6, 7, 63, and 65, along with Life, Health, and Accident licenses. Ken believes that everyone deserves to make informed financial decisions without feeling overwhelmed or intimidated. That’s why he writes articles that break down complex concepts into understandable terms, empowering you to navigate your financial future with confidence.