July Market Commentary
Stocks posted strong gains in July with emerging markets leading the way with high single digit returns. Large company growth stocks in the U.S. and international markets posted strong gains as well. These stock returns follow the best quarterly return since 2009. Despite challenging economic conditions and millions of Americans unemployed, stock and bond markets continue to rally, shrugging off a high wall of worry.
After a long period of underperformance relative to U.S. stocks, international stocks are starting to keep pace. A major contributing factor for this improving performance is the weakening of the U.S. dollar. With the Federal Reserve providing liquidity to our lending facilities and Congress providing fiscal stimulus, U.S. debt levels are rising dramatically.
In July, the economic rebound in European countries and China has been stronger than the rebound in United States. This provides the opportunity for international stock returns to be more competitive with U.S. stock returns. While we are not attempting to predict which countries will produce the best economic data, we believe it is important to own broadly diversified international assets that may benefit from these improving economic conditions globally.
Another notable fact in the stock market this year is the wide dispersion between returns in growth and value stocks. To put it simply, growth stocks are companies with high sales growth rates in faster growing industries. Value stocks are normally companies tied to the ups and downs of the economy, where businesses tend to be more mature, providing less growth, but usually some type of dividend payout. Since the pandemic has resulted in a recession, U.S. large company value stocks are down nearly 13% year-to-date through July, whereas U.S. large growth stocks are up nearly 18%. This is one of the highest dispersions of performance in market history, possibly setting up an opportunity for value stocks to perform better when economic recovery is sustained.
Looking ahead over the next several months, there are three major issues that we believe will provide the most influence on the direction of the stock market: 1) whether a new fiscal stimulus plan will be approved providing federal benefits to the unemployed. These benefits expired at the end of July; 2) the outcome of the November presidential election; and 3) the continued progress in the development of treatments and vaccines for COVID-19. While the recovery in the financial markets has been remarkable considering the headwinds that we are facing, we are preparing for potential volatility ahead as investors react to the range of outcomes for these issues.
We remain convinced that you should stay focused on your long-term financial goals, and not let current obstacles distract you from meeting your objectives. As always, we are here to help you navigate the changes in the markets, tax laws and any other financial issues you may encounter. As many of you are social distancing, we offer a variety of ways of communication.
Please stay healthy and safe and we look forward to engaging with you again! Call us anytime at 513.791.9258.
2020 Farm Party Cancelled
This year’s Salt Lick Creek Ranch Farm Party has been cancelled due to ongoing health concerns related to the coronavirus pandemic. Your safety and well-being is of upmost importance to us, and we are postponing this event until everyone can have the best experience possible.
We look forward to seeing you on the farm again when it is safe and healthy to do so!