State of the Economy and Markets
Quarter 3, 2020
I hope everyone had an opportunity to get out and enjoy the fantastic weather that summer 2020 bestowed on us here in the Northeast. We are blessed to call such a beautiful area of our country home. When all is said and done, 2020 will be a year that none of us will soon forget. COVID-19 has affected everyone, and, unfortunately, we are not out of the woods just yet. Being able to get out and enjoy the outdoors has been one of the few bright spots in an otherwise gloomy year.
As we approach the end of the third quarter, U.S. stocks are beginning to show weakness after what has been nearly five months of upward momentum. Momentum that propelled the major indexes to at or near record levels. The recovery from the lows of late March has been nothing short of spectacular, fueled by what were likely oversold conditions, government stimulus, hopes for a vaccine, and optimism that economic recovery was not far off. Ironically, the recent weakness is likely due to overbought conditions, skepticism over the prospects for another stimulus package, no currently available vaccine, and concerns about the strength of the economic recovery as we head into the fourth quarter and then into 2021. Adding to investor angst is that Election Day is now only a few weeks away and U.S.-China relations remain strained. Investor sentiment sure is a rapidly moving target.
The economic contraction in the second quarter was unprecedented and all signs point to a third quarter rebound of the same magnitude. While we expect growth to continue beyond the third quarter and into 2021, it will be slower and depend largely on infection rates continuing to decline and the development of a vaccine. While equities may come under continued pressure in the near-term, an improving economy, an accommodative Federal Reserve Board and supportive monetary policy should provide support during the fourth quarter and into 2021.
It is likely the U.S. presidential and congressional elections will take center stage in the coming weeks. Outcomes are still very much in question at this point, and because of that, the impact on the markets is far from clear. However, the results of one election rarely changes the landscape for more than a couple of years before the focus shifts to the next mid-terms and before we know it the 2024 presidential election. No matter the outcome, investor attention will ultimately return to the state of COVID-19 and the strength of the economic recovery.
Your relationship team is here to meet with you in person, over the telephone at (518) 584-5844, or even via video conferencing if you would prefer. We value your relationship and the confidence you have placed in Adirondack Wealth Management by choosing us as your financial partner. We know these are very difficult and trying times and we wish you and your family the very best. Stay positive, and stay healthy!
Sincerely,
Michael Brodt
Senior Vice President
Wealth Management Director
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