Message from Jon
We spent September 3rd to the 23rd declining on the S&P 500 index. We met the 50-day moving average and ended up piercing it before trying to reverse back upward these past 3 trading days. Over that period of time, we saw a 10.53% decline resulting in a correction (See 1st chart below).1
The NASDAQ was also in correction territory at a 12.68% decline over the same period (See 2nd chart below). 2
We still have about an increased volatility level on the VIX registering 31.15 as of Monday (See chart below).3 To give you some insights on this measurement, from single digits to about 15, you are normally considered under-valued-meaning you can buy almost anything if you see relatively low risk vs return ratio. From 15-20 is often considered fairly valued, meaning that you will want to make sure of what you are buying and how you are deploying capital since nothing is guaranteed. Above 25 you should count on a correction in the near-term, so be very cautious in how you want to deploy new capital. Above 35 should indicate that elevated levels of risk are present-kind of like swimming in the ocean when the lifeguard is not present and the signs on the beach indicate strong undertow.
When you look at the VIX measurement for 2020, you can see where we're humming along and then, bam! The pandemic hit us rapidly, followed by a slow receding risk line...but not quite gone enough to be back to pre-pandemic levels yet.
We are taking a cautiously optimistic view but are still sitting at above normal levels in cash, giving this market condition time to settle down. Our opinion that we expressed on the webinar last week is one of short-term concern but longer-term optimism once a vaccine and the election are in our review mirror.
These markets come with all kinds of opinions, views and "returns" that coworkers, friends and family will all have. Approach with caution. You will only hear a part of the story or see a part of the picture. Kind of like an iceberg, right? What you see is but a small portion of the total picture.
Till we speak again, enjoy your week,
Stocks Mixed Amid Uncertainty
WEEKLY UPDATE - SEPTEMBER 28, 2020
The Week on Wall StreetStocks were mixed last week as worries that stretched from Washington D.C., where prospects of a new fiscal stimulus bill dimmed, to Europe, which saw an increase of new COVID-19 cases. The Dow Jones Industrial Average declined 1.75%, while the Standard & Poor's 500 fell 0.63%. The Nasdaq Composite index gained 1.11% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, slumped 4.20%.