All the indexes we follow in this newsletter had a good month in July. The Dow was up by 2.38%, while the S&P 500, a much broader index advanced 5.52% through July. The Russell 2000, an index of smaller companies did okay at 2.71%, the NASDAQ hit new highs again from its 6.82% march forward. So far in 2020, through the end of July, these indexes have performed thusly,
Dow Jones -7.39%
S&P 500 +1.24%
Russell 2000 -11.27%
All that may be good information, but what HAS happened is not nearly as important as what WILL happen, right? When I talk to clients the main subject is, “What effect is the virus having on the market, and on my investments?” Of course, we can’t answer that here because all our clients’ portfolios are different, thus produces a different return according to what they own. We believe our active management has made our managed portfolios less volatile in 2020. If that helps our clients weather the huge ups and downs the market has shown us this year without jumping out in a panic, then maybe we’re doing our job. The good thing about active management is that we will not hesitate to go to all cash, but we do it as a result of our research, not our emotions.
In talking to many of you, I get the sense that there is a lot of concern about the nation right now. The Portland and Seattle mayors seem to have given in to mob rule, creating chaos in those cities and uncertainty in the whole country. The virus that came to us courtesy of the Chinese Communist Party has the whole country wearing masks, social distancing and living their lives with a lot more fear of death than they had a few months ago. Many small businesses are struggling to remain viable while the larger businesses are doing okay. To see how the different parts of the economy are doing, just look up to the performance numbers above. Tech (as measured by NASDAQ) is doing great! Employees working from home are buying new computers and software. They are making ZOOM calls instead of flying on Delta to see their clients. Amazon is selling more stuff than ever, but individual stores are having to limit the number of people they even let inside to shop. So maybe you can see why the index for tech companies (NASDAQ) keeps reaching new highs every month, while the index for small companies (Russell 2000) is over 30% behind its tech counterpart.
There is also a lot of money on the sidelines right now. Another complaint I’m hearing from you when I call is that you can’t make any return on your money in the bank. CD’s are running less than 2% and money market funds are at almost zero. With that being the case, many are investing in the stock market because they have almost no place else to go. With all that said, and with all of us feeling like we need to be cautious, the market keeps marching ahead. Below is a comment from one of our research providers;
“While others have turned negative, we have yet to see evidence that the up trends from the March lows are failing. In fact, while performance remains choppy within most cyclical sectors, we are seeing a healthy list of stocks breaking-out of their June-July.”
So we will continue to manage actively.We will be in the market when our research points us in that direction, and we will be out when it doesn’t.I appreciate your belief in us and the way we are managing at this time.We do it for the sole purpose of better returns for you.Without you there’d be no ProVest.