Market Commentary

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May 2020 Market Recap

Market Commentary |

by Andrew Murphy, CFA | Senior Director of Portfolio Management

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The market continued to recover in May as the S&P 500 increased by +4.8%. The S&P 500 is now down -5.0% for the year after falling by nearly -34% from February 19th to March 23rd and then rebounding by over +36% since then. In our First Quarter Review and Outlook we stated that, we suspect we will remember this period as extraordinarily difficult, but from an investment perspective that individuals who stayed invested were rewarded. At the time, we thought the market would recover over the next year or so, and instead it has mostly taken a few months. The rebound has been driven by four pillars: Federal Reserve actions, fiscal stimulus, positive developments related to the virus, and optimism about the restart of the economy.

While we welcomed the market rebound and were able to take advantage of it, we are prepared for more volatility rather than a rapid continuation to new all-time highs. Developing a short-term outlook during a pandemic is challenging based on the wide range of potential outcomes, and more than ever the current environment requires a comprehensive financial plan and investment process. We are moving forward with a measured approach as plenty of risks remain including a potential second wave of the virus that necessitates another shutdown, increased tensions between the US and China that could disrupt the new trade deal, and the upcoming elections. We are keeping client equity and fixed income allocations close to their target levels as determined by their financial plan while tilting toward areas of value within those asset classes. On the equity side, we are tilted toward high quality US large cap stocks (we allocate across regions, countries, market caps, factors, sectors, and industries). On the fixed income side, we remain focused on achieving ballast, stability, and income while accounting for short-term cash needs. We will continue to utilize our time-tested investment process based on risk management, asset allocation, and security selection as we monitor new developments and maintain critical flexibility to take advantage of opportunities as they arise.

MARKET RETURNS

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DISCLOSURES:

The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

All indexes mentioned are unmanaged indexes which cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. Past performance is no guarantee of future results.

The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

It is important to remember that no investment strategy assures success or protects against loss. Asset allocation does not ensure a profit or protect against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Rebalancing a portfolio may cause you to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. All investing involves risk which you should be prepared to bear.