2ND QUARTER EQUITIES
Equity Market: The market was strong in the first six weeks of the year, continuing the bullish trend seen in most of 2019. Then the coronavirus panic hit as business around the world came to a standstill. The overall market lost nearly 40% of its value in a five week period. The low point for the S&P 500 was on March 23. Then investors regained confidence as the Federal Reserve and Congress responded with massive packages of monetary and fiscal stimulus. The market leaped back in April and May and then leveled off in June.
The Dow Jones Industrial Average gained 17.8% in the second quarter, but was still down 9.6% for the year-to-date. The S&P 500 was ahead 19.9% for the quarter and down for the year by 4.0%. The Nasdaq Composite index was ahead 30.6% in the quarter and 12.1% for the year. Its performance was driven by the strength of the large technology companies. The Russell 2000 index was up 25.0% in the quarter and negative 13.6% for the June 30 year-to-date.
Preferred Equities: As always, despite market conditions, we look for long-term equity opportunities. Our focus is on companies that can weather both the short-term period and flourish in a longer time frame. We want fundamentally sound companies with reasonable valuations and that pay dividends. In that context, we are looking at these sectors:
TECHNOLOGY: We are holding but not expanding our allocation to the FANG stocks which are strong but maybe highly valued at the moment. Stocks in bio tech companies that offer potential cures or treatments for the virus are interesting.
CONSUMERS: The consumer staple companies are a base in this situation. The discretionary companies have promise as more people go back to work.
FINANCIALS: Low interest rates are problematic for traditional banks – but diversified financial companies and non-banks are good opportunities.