Month-to-date, February’s stock market performance has certainly been making up for January’s disappointing end. There are several reasons for the equity market’s overall optimism, all of which point toward better days ahead for the economy.
While the expression often goes “time is money,” at Buckingham Advisors we believe a more fitting expression would be “money is time.” No one can have more time, and money cannot directly buy happiness, but having more wealth could allow you to focus more of your time on what you enjoy. Money is a tool, not something to be loved or feared in and of itself.
It is said that there often seems to be a disconnect between Main Street and Wall Street. Despite all the social and economic pain endured last year and the fastest market decline for the S&P 500 into bear market territory, 2020 ended with the S&P 500 rising 18.4% and reaching 33 new record closing highs. After last year, we really should be used to expecting the unexpected from markets.
It's worth noting that the S&P 500 has marked 30 new closing highs this year and rallied 64% from its March low as of yesterday’s close. The technology heavy NASDAQ Composite has registered 50 new closing highs so far this year. I am not sure if that is a record number of new highs in a single year for that index, but it is certainly impressive. In addition, after years of lagging their large size peers, small company stocks tracked by the Russell 2000 index have reached nine new record closing highs year-to-date.
Recently the S&P 500 hit a new intraday high, which was driven both by some certainty around election results as well as optimism for a COVID-19 vaccine on the horizon. The morning after election day, it seemed fairly clear that the Republican party would maintain control of the Senate. Stock markets rallied after having been positioned for a “blue wave” of Democratic control that would have led to more sweeping reforms.
October’s positive uptrend in the stock market has been a welcome respite. As of yesterday’s close, October’s month-to-date performance of the S&P 500 has basically made up for September’s decline. On a total return basis, the index is up 9.4% year-to-date and has gained 18.5% over the past 12 months. That is impressive performance considering we continue to live under COVID-19 rule in a partially opened economy, and it is only 18 days from a contentious election between two radically different candidates.
August continued the recovery from the March 23rd bottom, with a total return of 7% for the S&P 500 Index through the end of the month. The index reached new all-time highs on September 2nd but has recently given back some gains.
The rebound in equities from the March lows continues, with major stock indices trading once again near the all-time highs seen in February. Between the sharp first quarter drop and gains since, this leaves the index up 5.6% year-do-date including dividends as of yesterday’s close.
As investment professionals, our opinions on specific investments can change with market conditions, but our approach - how we think about building investment portfolios - is consistent. We start by thinking about you and how your investments fit into your overall financial plan and unique tax situation. We take a long-term view, thinking in terms of years and even generations. As fiduciaries, we put our clients’ needs above all else.
This year has been a turbulent one, as much of the news and market fluctuations have been centered around the COVID-19 pandemic. Even with COVID-19 still very much in the news, investors are already starting to look beyond the virus and out to the election that is several months away.