Weekly Market Commentary

July 13, 2020

 

The Markets

During 2020, stock markets in the United States have taken investors on an emotional rollercoaster ride. By late March, the Standard & Poor’s 500 Index had lost more than 30 percent. The Index has since regained most of those losses, although there have been many ups and downs along the way.

The culprits behind market volatility have been fear and uncertainty, inspired by twists and turns in the coronavirus saga.

Volatile markets often cause investors to become uneasy. Sometimes, the emotional rollercoaster causes investors to focus on short-term performance rather than long-term goals. Today, market fluctuations, in tandem with health concerns, work anxiety, and social distancing requirements, can trigger a stronger response than usual, making investors particularly vulnerable to the emotional biases within ourselves.

If short-term market swings are making you restless or uncomfortable, do not keep it to yourself. Let me know so I can spend time with you on the issue and answer any concerns you may have. I am well-read on the topics of today, so please use me as a resource instead of cable news.

 

The Coronavirus Effect

COVID-19 has been reshaping financial habits. During the second quarter, credit card debt and personal savings data showed we were spending less and saving more than ever before.

In 2019, when a pandemic was a planning and preparedness exercise for healthcare health officials, the debt Americans accrued on credit cards increased between 2.5 and 4.6 percent each quarter.

Since COVID-19 arrived on our shores and began to spread, credit card debt has fallen dramatically. From January through March, it was down 7.6 percent.

Lower spending may have contributed to higher savings. The personal saving rate in the United States is the percentage of income left after people spend money and pay taxes each month. It increased dramatically in 2020:

January 2020:  7.9 percent (seasonally adj. annual rate)

February 2020:  8.4 percent (seasonally adj. annual rate)

March 2020:  12.6 percent (seasonally adj. annual rate)

April 2020:  32.2 percent (seasonally adj. annual rate)

May 2020:  23.2 percent (seasonally adj. annual rate)

Some believe higher rates of saving are the result of lockdowns and will reverse quickly as states reopen. An analyst cited by Jessica Dickler of CNBC explained, “In a month with large government stimulus payments to the majority of U.S. households and widespread economic shutdowns that largely curtailed discretionary spending, the boost to income and the plunge in spending produced an outsized savings rate.”

The shift in percentages from April to May appears to support the hypothesis. We really will not know whether Americans will continue to charge less and save more until the pandemic ends.

 

Focus On The Positive

“It’s good to have money and the things that money can buy, but it’s good, too, to check up once in a while and make sure that you haven’t lost the things that money can’t buy.”

–George Lorimer, Journalist

 

Best regards,

Bill Spalding