What a year it’s been. Markets hit a new high in February, declined over 30% at the onset of the pandemic, and then went on to stage a dramatic rebound from their March 23 lows with the S&P 500 rallying over 50%. The third quarter again saw the S&P 500 hit new highs. Yet market gains were highly uneven; while the five largest stocks in the index returned a staggering 35% for the year through September 30, the bottom 495 stocks in the index returned -3% for the same period.
As we enter the final quarter of the year—and the last month before the U.S. presidential election–wide swaths of the US economy—including millions of American workers—continue to struggle in the face of COVID-19. Here’s seven things you need to know now as we approach year-end.
Remember, this is why you’re diversified. Diversifying across and within asset classes is the best defense against short-term market volatility. The cash and bond components of your portfolio are act as ballast against equity market volatility; and equities provide the growth engine your portfolio needs to build wealth and outperform inflation over time. And don’t ignore the importance of global diversification, especially given the U.S. dollar’s recent decline. While U.S. stocks have outperformed their non-U.S. counterparts over the past decade, there are a number of reasons to suggest non-U.S. stocks are positioned to do well given their low prices, higher dividends, and a weakening U.S. dollar.
Stick with your plan. You and your advisor have worked hard to determine the right asset allocation needed to achieve your long-term goals; stick with it. After all, you’re not investing for the next two months. You’re investing for the next twenty years.
We’re here to help. We understand you may have questions and concerns about the election and its potential impact on markets, your portfolio, and your goals. It’s important that you feel confident in your financial plan. That’s why we encourage you to call at any time to discuss your financial plan and portfolio with your advisor. We’re always here to help.
To view the full Q3 Markets Summary, please click here to download a PDF.
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