Now that’s it’s August, I find my thoughts drifting toward the fall but also looking back and marveling at the resilience of the markets since the end of March. Much of the gains since then have had to do with unprecedented global monetary and fiscal stimulus and more recently, a downward trend in new cases of the virus. The former carries with it the realization that the debt increase for most countries is far greater than it was in 2009. This certainly will have a lasting impact on many global economies and therefore it is at the very top of my mind when analyzing the companies you currently own, while simultaneously thinking about what we may want to buy (or sell) in the next few months and even years.
Another driver in the strength of the markets has been historically low interest rates. Countless investors have been rotating into higher dividend-paying equities simply because the traditional fixed income that was once used to provide monthly cash flow, is now in many cases yielding below 1%.
Moving into the final quarter will prove interesting as we examine how the various sectors fared in the 3rd quarter – a traditionally slow period during the “normal” summer stretch. This past four month period saw technology and healthcare leading the pack in a big way, while the more consumer-driven retail, hospitality and travel industries were hit hardest.
This autumn also brings with it the very contentious and volatile US election. Since 2020 began, I have purposely shied away from speculating about what might happen as I didn’t feel it would serve any purpose to play that guessing game. Now however, my job has been made easier because RBC’s US Equity Strategy team has put together a very comprehensive report entitled, “Eye on the Election: The Biden Playbook”. In it they lay out several different scenarios, and how the markets/sectors might be impacted. Please click here for the full PDF report.
It’s still summer, so get out there and enjoy the warm weather!
Libby
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