Quarterly Commentary – July 2020

After the gloom and doom of the first quarter, stocks made a remarkable recovery with all major U.S. stock indexes posing gains. For the quarter ending June 30, 2020, stocks had the following gains:

Stock Market IndexQ2 2020Year-To-Date
Standard & Poor 500 (S&P 500)
500 Largest U.S. companies
Dow Jones Industrial Average (Dow)
30 selected Large U.S. companies
100 Largest companies on the NASDAQ exchange

While the S&P 500 and Dow are still negative for the year, the more technology heavy NASDAQ index is actually ahead 12.11%. Technology stocks have benefited greatly from the move to work from home as the reliance upon your laptop computer, tablet and smartphone have become an even more necessary part of life.

This turn around was not totally unexpected as the stock markets had fallen so fast from February 12, 2020 to the low of March 23, 2020. The Dow’s fall of over 25% was one of the swiftest downturns in the history of the index. Prices of some stocks had fallen more than 50% from their high points and investors looked at the “cheap” nature of these stocks and moved in to buy. This phenomenon happens time and time again. Traders get nervous and sell while investors (those looking at longer time horizons benefit). Keep in mind there are leading indicators and lagging indicators. A lagging indicator, for example the unemployment rate, is a lagging indicator as that number is merely telling us what HAS already happened. On the other hand, the stock market is a leading indicator of what MAY happen in the future. COVID-19 numbers can be both lagging and leading indicators. In other words, the daily infection data is an indicator of what has happened but at the same time can be a leading indicator of future mortality. Recently I saw in the Seattle Times that the daily COVID-19 positive results had spiked but there were zero deaths that day. No deaths in a day is great but that does not mean the crisis is over. One only needs to look at the leading indicator side of the daily infection rate to surmise that deaths from the virus could rise in the near term.

Back to the stock market. At this point the indication from the move of the stock market is that with the re-opening of the U.S. economy sales will begin to rebound and some semblance of normalcy will re-emerge. Will this happen overnight and in a straight line? Almost without a doubt, no. However, the economy will re-open, people will start driving again and even flying. Some industries will recover sooner than others while some (like technology) will continue to prosper even in the COVID-19 environment.

We have a strong belief in the financial markets and urge all of our clients to take a longer-term view of their investments than what happened in the past quarter. We do recognize that all have different investment horizons and appetite for volatility. One size does not fit all. However, whatever time-frame you may have, it is no doubt longer than 3-6 months and if we can keep the focus on what is most probable as to the extremes of the possible, we feel all will be better served.


Current data for the Dow Jones Industrial Average found at https://www.morningstar.com/markets historic data before the year 2020 found at the websites noted above. Past performance does not indicate future results. This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed by Kestra Advisory Services, LLC. as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor. The Dow Jones Industrial Average is a popular indicator of the stock market based on the average closing prices of 30 active U.S. stocks representative of the overall economy.