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October 28, 2020
Equity markets were down roughly 3.5% (350 basis points) today and are now down 5.5% (550 basis points) for the week. After a nice rebound from the depths of the March lows, the U.S. equity market has gotten a bit wobbly over the past two months, with many crosscurrents creating anxiety:
Although days like today and weeks like this week can be disquieting, there are distinct market tailwinds that should prevent any imminent collapse in the equity markets. The Fed’s extremely loose monetary policy should keep interest rates low and, at the same time, prevent any credit freeze. Fiscal policy, despite the political acrimony, should eventually produce some level of income and business support. The progression of the second wave of COVID-19 is a major wild card to the outlook. However, the population has largely learned to adapt to the disease as we await a viable vaccine. Reported third-quarter corporate revenue and earnings are exceeding estimates, and analysts are upwardly adjusting estimates for the fourth quarter and 2021.
The point is not that these positives are definitive outcomes, but that they are possible outcomes as is the possibility of negative outcomes. Financial markets are anticipatory. As news on the virus, fiscal stimulus, and the election ebb and flow, the market is responding accordingly. It’s important to look out three months when a number of these issues should be resolved. Given how quickly the news changes, timing these market events can be perilous. At current levels, we think adjusting equity allocations down from the strategic asset allocation levels is unwarranted.
For more market insights, please contact a Cerity Partners advisor,
Please read important disclosures here.
Ben is the Chief Investment Officer and a Partner in the New York office. He leads the firm’s Investment Committee and is a member of...
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