Wednesday, July 1, 2020

Blame It on the Coronavirus




Stock markets in the United States and Europe retreated last week as the number of new COVID-19 cases increased steadily in America. On Thursday, there were more than 44,000 new cases, the highest daily total to date, according to data from the Centers for Disease Control.

“The turn has created a new puzzle for investors, many of whom had started focusing on 2021 earnings expectations as the next performance-driver for stocks. The old market gauges, like manufacturing surveys, jobs tallies, and retail sales, feel like lagging indicators. The new leading indicators deal with the disease. Yet tracking its progress is tricky even for epidemiologists who have studied these issues for decades,” reported Avi Salzman of Barron’s.

Another piece of the investment puzzle was reshaped when the Federal Reserve (Fed) released bank stress test results last week. It found most banks were likely to remain well-capitalized if economic growth rebounds relatively quickly. However, in a worst-case economic recovery scenario, banks did not fare as well. Consequently, the Fed suspended share buybacks and capped the dividends banks can pay investors, reported Alexandra Scaggs of Barron’s.

“The Fed…also said future payouts would depend on bank earnings – and bank earnings will start to look worse as pre-coronavirus quarters drop out and are replaced by COVID-impaired results. Even that decision might not have been a problem if the market believed the spread of COVID was under control. Then the numbers started coming out. Florida’s seven-day average of cases grew 7.8 percent, up from the previous day’s 4.1 percent. Arizona’s jumped to 5.4 percent, from 2.9 percent. In Texas, the positivity rate – that is, the number of tests divided by positive results – hit 11.8 percent,” reported Ben Levisohn of Barron’s.

Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, dispelled the notion this is a second wave of the virus. He told The Wall Street Journal, “People keep talking about a second wave…We’re still in a first wave.”



For advice over the current state of our economy, call us at 877-340-1717 or email greg@womackadvisers.com
 

Best regards,
Womack Investment Advisers, Inc.


WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK  73013
California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717

Monday, June 15, 2020

How Does Volatility Impact Your Choices?



When it comes to investing, people tend to have short memories. During bull markets, as stock values push higher, many investors want to increase their exposure to stocks. Why wouldn’t they? When volatility is relatively low, it can be difficult for investors to recall why they limited their exposure to higher risk assets.

Similarly, when a bear market arrives and volatility increases, investors often want to retreat to the safety of more conservative investments. After all, when volatility increases and stock values fluctuate dramatically, it can be difficult for investors to recall why they chose to invest any portion of their portfolios in stocks.

The fact is, investors often fall prey to a phenomenon known as recency bias. People tend to believe what is happening now will continue to occur in the future. It won’t. The economy tends to cycle from expansion to contraction and back to expansion. Stock markets tend to cycle from bull markets to bear markets and back to bull markets. Periods of high volatility tend to be followed by periods of low volatility.

We are all susceptible to recency bias and other behaviors that can undermine investment success. In their research paper, The Behavior of Individual Investors, Brad Barber and Terrance Odean concluded:

“The investors who inhabit the real world and those who populate academic models are distant cousins. In theory, investors hold well diversified portfolios and trade infrequently so as to minimize taxes and other investment costs. In practice, investors behave differently. They trade frequently and have perverse stock selection ability, incurring unnecessary investment costs and return losses. They tend to sell their winners and hold their losers, generating unnecessary tax liabilities. Many hold poorly diversified portfolios, resulting in unnecessarily high levels of diversifiable risk, and many are unduly influenced by media and past experience.”

If recent volatility has caused you to question your investment choices, please get in touch. Together we’ll review your goals, strategy, and portfolio allocation and suggest recommendations which support your goals and risk tolerance.


Are you prepared for market volatility?
Be prepared and have a plan. Watch our video above on successful investing, and receive a free report on how much risk you should be taking.

 
 
Best regards,
Womack Investment Advisers, Inc.


WOMACK INVESTMENT ADVISERS, INC.
Oklahoma / Main Office: 1366 E. 15th Street - Edmond, OK  73013
California Office: 4660 La Jolla Village Dr., Ste. 100 - San Diego, CA 92122
Phone (405) 340-1717 - Toll Free (877) 340-1717

Monday, June 8, 2020

May Jobs Report



Among market-moving economic reports the monthly payrolls report is among the most influential—and this week’s report was no disappointment.  Almost all analysts were caught flatfooted at its release, with the consensus forecast expecting a loss of 7.25 million additional jobs and an unemployment rate of 19.0%. 

Kate Bahn, director of labor market policy and economist at the Washington Center for Equitable Growth, was only able to mutter “WTF” at the release, while David Donabedian, chief investment officer at CIBC Private Wealth Management was quick to adapt to the new data stating that while the economy remains in a deep recession, “it is also clear that the recovery has begun, and that it is ahead of schedule.”  But Paul Krugman, Trump-hating economist at the New York Times, suggested that Trump had somehow “gotten to the BLS” and cooked the numbers (he later apologized, sort of).  Chart from Marketwatch.com.