Economic recovery drags: What to expect from the stock market through 2020
LEXINGTON, Ky. (WKYT) - Fall is upon us, college football is kicking off, states are continuing to try to re-open operations and the economy is in a fragile state dealing with the pandemic. July and August saw strong growth in the stock market even while the economic recovery has been slow. September has opened with the market pulling back off highs as investors gauge the ongoing struggles in the economy. Josh Smith, an independent fiduciary financial advisor of Strategic Wealth Designers, joined WKYT to offer insight into where the stock market heads for the rest of 2020. He says several factors will contribute to how the market fares in the months ahead.
“A lot of people think a vaccine arrives, November 1st, December 1st, whatever it may be and that solves everything, but it’s not that simple,” Smith says. “I definitely believe the market will get a pop from a vaccine being readily available but you have people who won’t take it, you have others who will want the 2.0 version which will likely show up a few months after the first one. You also won’t see states going from zero to 100 immediately. It would be ideal from an economic standpoint, but it won’t happen. The ramp-up will be gradual.”
The stock market pulled back sharply to open September. Tech stocks that had soared to all-time highs were especially hit hard. For investors, the continued ups and downs have been difficult to accurately project the months ahead. Smith says to expect more turbulence for the rest of the year.
“Asset allocation is so important for your financial portfolio. 2020 has been a great example of how you can’t time the market,” Smith says. “Everyone was riding high on the 10-year bull run in the stock market earlier this year. March arrives and some investor’s portfolios were whacked down by 30-40%. Then the market goes on a tear for the fastest growth in a 50-day period in the entire history of the stock market. Now we are seeing a pullback again. With the election, the expected vaccine and continued trade war talks bubbling under the surface, it should be certain that more choppy trading is ahead for investors.”
The final wildcard for the economy centers around the Federal Reserve. Throughout the pandemic, the Fed has fired big shot after big shot of stimulus into the markets, propping up sectors that would have wilted without the Fed’s support. Once the election goes by and a vaccine has curtailed the coronavirus, the market will see stabilization, and eyes will turn to the Fed to see how they ease the aide they have been providing. Smith believes the Fed will be slow to ease their support to make sure that the American economy is truly stabilized for 2021 and beyond.
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