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Market Volatility During the Remainder of 2020

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Financial markets between September and November were marked by mostly saw-toothed results culminating in very positive returns last month.  The primary driver of this market volatility continues to be COVID-19.  There continues to be downward pressure originating from an increase in cases of the virus and upward support coming from positive vaccine news from multiple companies.   While these observations cover the market as a whole, it is important to note that this news has been processed very differently within certain industries.  For example, as positive news was released regarding vaccines, work-from-home technologies felt downward pressure on share price, while the rest of the market–composed primarily of larger companies–soared.  

Although the price-to-earnings ratios across the market point to the idea that the markets have priced in a substantial amount of good news, there remains a great deal of uncertainty going forward. A new administration which is expected to be less company-friendly will take office with drastic changes potentially muted by the Senate and news regarding COVID-19 will continues to develop.  

The second wave of the pandemic seems to be emulating the 1918 Spanish Flu, but from a historical standpoint we have little data to forecast the effects of this wave on the financial markets. During the third quarter of 2020, investment guru Warren Buffett removed his investments in Costco and lowered his stake in Apple. This appears to point to a concern about big box stores and an overvaluation in this particular technology company.  

We at GEBA Wealth Management believe a substantial amount of good news is priced into the market at the present time.That could place downward pressure on the market going forward. In general, we continue to recommend* dollar-cost-averaging into the market ensure that our investors are diversified. We maintain that  our investor’s  short/mid-term investments have protection from market risk, while their long term investments have the potential to grow.

Let us know how GEBA Wealth Management can help.  We welcome your calls and emails at (800) 826-1126 or [email protected]

Securities are offered through Cape Securities, Inc. Member FINRA, SIPC. Investment Advisory Services are offered through Cape Investment Advisors, Inc. GEBA Financial Advisors are Registered Representatives of Cape Securities, Inc. Insurance offered through Truchoice Financial.

*These are general comments and do not represent recommendations.  Please consult your financial advisor for recommendations.

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