Weekly Market Commentary

April 9th, 2020

 

Covid-19 Update

 

As always, I hope all of you are staying safe and sane. As some of you have mentioned, it sure feels like Groundhog Day all over again in our day to day lives. Hopefully this comes to end sooner than expected. At least that’s what the markets have been thinking for the last week. As mentioned in previous commentaries, when drastic sharp and painful selloffs occur, there is a relief rally every time. Although it is difficult to do in the moment, as headlines of “We’ve never seen anything like this before” ring in our ears, we must follow the data and our proven investment rules. The S&P 500 is up over 20% from the intraday low on March 23rd.

 

The recent sharp rally is the biggest weekly percentage gain for the S&P 500 since 1974. We’re using this as an opportunity to raise cash. The objective: 1. preserve capital if things get worse, and 2. To be able to buy quality oversold stocks at a discount. What accounted for the recent rally? Besides extreme technically oversold conditions, the news cycle has shifted drastically. Case counts across the globe are slowing. The small business loan program is requesting an additional $200B of funding. Evidence is starting to suggest a seasonal nature to the virus, and biotech companies have been making progress on therapeutic treatments and vaccines.

 

Although case counts have been trending down, the market moving news two weeks from now is going to be focused on unemployment data and the upcoming corporate earnings season. Until we get a peak in unemployment, and clarity around the real damage this has caused to corporate earnings, we cannot assume the bottom is in.

 

We’ve gotten some relief in the last 10 days, and some of that can be attributed to how extremely oversold the markets were going into the last week of March. We’re not giving an “all clear” signal yet, but in our view the case for a global depression is out.

 

*For those of you taking RMD’s (Age 70 ½ or over) * The CARES Act that was recently passed states that you are not required to take a Required Minimum Distribution from your IRA in 2020. If you do not want to take an RMD this year, please call the office and let us know. This may help reduce unneeded taxable income and help preserve your assets for future income / legacy planning needs.

 

Best Regards,

Alex Lewellyn

Lewellyn Financial Management 

 

The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to directly invest in an index. The return and principal value of the investments will fluctuate so that, when redeemed, they may be worth more or less than their original cost. Past performance is not a guarantee or a predictor of future results of either the indices or any particular investment.

Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision.

Securities offered through Triad Advisors LLC, member FINRA/SIPC. Advisory services offered through Lewellyn Financial Management. Lewellyn Financial Management is an independent Registered Investment Advisor and is not affiliated with Triad Advisors, LLC.