Mary Ann Drucker, Assistant Portfolio Director, gives us an update on what happened in the markets in April.
May Stock Market Update Transcript
Hello, I’m Mary Ann Drucker here with our video market update for May 2020. Our last monthly market update began with the words how quickly things can change. Well, the same can be said for the month of April. While the S&P 500 fell over 12% in March, April brought the exact opposite with the S&P rising over 12%. By the end of April, the S&P 500 had recouped more than half of its drop from the February high. Many areas of the bond market have recovered as well, leaving some to wonder whether the markets are well on their way to a full recovery.
And yet the world is still reeling from a pandemic, still grappling with the loss of life and economic destruction that has been left in its wake. With our situation still so fragile, why have markets rallied? Could it be that April was simply the eye of the storm with the resurgence of bad weather to follow if the pandemic takes a turn for the worse. A sharp decline in equity prices over a short period of time is what is referred to as a waterfall drop. According to Ned Davis, the waterfall decline from February into March was the worst on record for the Dow since 1929.
Relief rallies such as what we saw coming out of March are not uncommon after such severe market declines. Such rallies are often spurred by a perceived turn of events, such as the government unleashing an aggressive stimulus package. That, along with any positive news coming out of the fight against COVID-19, has calmed investor fears at least for the time being. Though markets have recovered somewhat in April, we still have a ways to go before we can feel comfortable that the equity markets are in the clear. At the end of April, the S&P 500 was still down close to 10% for the year and down 14% from its high in February. Nevertheless, the markets have recovered sufficiently enough for us to put our feet back into the water.
In our interim market update a few weeks ago, we mentioned that we had begun to move the portfolios back into the stock and/or bond markets. This table shows the broad asset allocations across our six strategies at the end of April. Although we have raised exposure to stock and bond funds in the portfolios, this exposure is still fairly modest, aside from the sector rotation strategy. If stocks and bonds continue to bounce from here, we’ll be prudent in our process of putting more cash to work in the portfolios. But if we are in the eye of the storm and the skies begin to darken once more, we won’t hesitate to take defensive action as we did earlier in the year.
Finally, it is our sincere hope that you remain healthy and safe, comforted by family and friends though distance may separate you. Rest assured that FSA remains fully operational and that your advisor is only a phone call away.
Well, that’s it for this video market update. If you have any questions or comments, please don’t hesitate to call or email us. Until next time, thank you for watching
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