Wednesday, we learned that the U.S. economy in the first quarter shrank at its fastest pace (-4.8%) since the last recession, ending the longest economic expansion on record. It is an obvious point to state that 2020 has been a period of extreme financial market volatility. During this time, it is necessary to believe your beliefs and doubt your doubts. Meaning you already know that the bestway to navigate a choppy market is to have a good long-term plan and a well-diversified portfolio. But sticking to these fundamental beliefs is sometimes easier said than done. When put to the test, you sometimes begin doubting your beliefs and believing your doubts. Fear can lead to short-term moves and bad financial decisions that divert you from your long-term goals.
Market sentiment reflects human sentiment, which lately has been quite negative—understandably so. However, I can almost begin to sense sentiment changing. New drug therapies are being announced and dozens of vaccines are in development. This change in sentiment, combined with government action creates more confidence, so we see stocks rising. It does not mean we are out of the woods, likely more challenges and perhaps market drops lay ahead, but we are seeing a return of optimism. If, the states that are reopening do so without a large spike in cases and we see some of the lost demand return, then we may be on our way to talking about this bear market in the past tense. I am hopeful but cautious that we can build on this positive sentiment.
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