The first half of 2020 ushered in a market environment unlike any in recent history. For the first time since 1932, a 20% stock market decline in one quarter was followed by a 20% gain in the next.
US stocks had an explosive second quarter with the tech-heavy Nasdaq 100 Index up 30%, the S&P 500 gaining 20%, and Dow Jones Industrial Average jumping 18%, its best quarter in 33 years.
But who’s celebrating?
Despite the massive rally off of the March lows, most major stock market indexes are still negative year to date through June 30, 2020. The Nasdaq 100 is one exception, up 16.9%. The S&P 500 is down -3.2%, and the Dow is off -8.5%.
We are deep in a recession, and the pandemic is raging across parts of the US.
The outlook is still uncertain, and many key questions remain unanswered.
- Can we contain the Covid-19 virus while lessening the impact on the economy? “Stocks may continue to be at the mercy of virus-related news—both positive and negative,” Schwab noted in its mid-year outlook.
- Will there be more fiscal stimulus? Government stimulus has a tremendous effect, but Federal Reserve Chairman Jerome Powell told Congress that more is needed to help the economy recover.
- How might the election affect the markets? The upcoming election is another source of uncertainty in the second half of 2020, however, elections typically don’t have as much of an impact on the market and on the economy as many investors expect.
How fund investors can move forward in 2020’s uncertain markets
✔ Stick with your plan. In our 50 year history, we’ve found that the best antidote to uncertainty is to have a plan. When you adopt a plan, you set up some ground rules and guidelines that will help you make investment decisions along the way so you don’t have to come up with a new game plan for every shift in the markets.
✔ Stay active. In markets like this, we believe mutual fund investors need a responsive and adaptive strategy like ours more than ever. As active investors, we can adapt as markets change and capitalize on a wide range of opportunities from different kinds of mutual funds and exchange-traded funds (ETFs).
✔ Talk with your advisor. Mid-year is a good time to talk with your advisor about how you’re invested and make sure your investments are still aligned with your financial goals.