Midyear Market Outlook from Wealth Managers

Lately, the economy has looked as volatile as the stock market: up for a few weeks and then back down again. This is generally attributed to the reopening of the country in early May, followed by what looks to be a gradual and sporadic reclosing due to an upswing in outbreaks of the coronavirus. In early July, Raphael Bostic, president of the Atlanta Federal Reserve Bank, observed that recent signals show the economic recovery is in danger of stalling.1

This volatile economic environment makes it difficult for money managers who publish midyear market comments, because the outlook could change by the time those reports are published. As always, whenever you read advice and predictions from financial professionals, it’s important to view recommendations within the context of your own goals, circumstances and investment portfolio. If you’d like to discuss any potential midyear changes in your strategy, please contact us to schedule a review.

Like most industry analysts, T. Rowe Price cautions that the trajectory in the equity and credit markets will depend on containment of the virus. Most analysts agree that economic recovery is dependent on “flattening the curve” of contagion. The good news is that T. Rowe analysts believe tech companies have accelerated in both growth and market power by several years due to remote-work demands. However, much depends on how well some of our global partners respond to the health crisis. This variable could cause U.S. distributors to rethink their corporate finances and supply chains.2

Charles Schwab’s midyear outlook acknowledges that much of the market’s gains since the first outbreak of COVID-19 can be attributed to the Federal Reserve’s decision to cut interest rates and the fiscal stimulus passed by Congress. However, it is unlikely that we will see additional significant fiscal initiatives moving forward, so the market is likely to start pricing based on a real growth rate that represents lost output from consumer goods and services. With that said, high unemployment rates and low inflation are likely to continue driving quantitative easing by the Federal Reserve, which is currently increasing its balance sheet by $120 billion a month in treasuries and mortgage-backed securities.3

The chief investment officer at Merrill Lynch offers a bullish perspective for the immediate future. Their analysts believe that the markets are in the early stages of another long-term bull session with above-average valuations. They favor equities relative to fixed income and cash, as well as the prospects of global equities since many countries have rebounded from the pandemic and show signs of acceleration.4

Morgan Stanley also maintains a positive outlook. Based on recent market resiliency, their analysts believe a new cycle has started and that a U.S. recovery may be more “normal” than widely predicted. In fact, analysts maintain the economy will recover by early 2021, driven by global gross domestic product with 3% growth for the year.5

The Capital Group keeps its outlook simple: The markets will remain volatile through the rest of the year. However, it believes that investors are better off weathering the storm in the market than sitting on the sidelines, as recent downturns have demonstrated that when the market does rebound, it remains stronger, longer.6

Content prepared by Kara Stefan Communications.

1 Kanishka Singh. Reuters. July 7, 2020. “Fed’s Bostic says U.S. recovery may be ‘levelling off’: FT interview.” https://www.reuters.com/article/us-usa-fed-bostic-idUSKBN2480G0. Accessed July 16, 2020.

2 Robert W. Sharps, Justin Thomson and Mark Vaselkiv. T. Rowe Price. June 30, 2020. “Managing to the Other Side.” https://www.troweprice.com/personal-investing/resources/insights/managing-to-the-other-side.html. Accessed July 16, 2020.

3 Kathy Jones. Advisor Perspectives. June 30, 2020. “2020 Mid-Year Outlook: Fixed Income.” https://www.advisorperspectives.com/commentaries/2020/06/18/2020-mid-year-outlook-fixed-income. Accessed July 16, 2020.

4 Merrill Lynch. July 2020. “The Reflation Triangle.” https://olui2.fs.ml.com/Publish/Content/application/pdf/GWMOL/Viewpoint_July_2020_Merrill.pdf. Accessed July 16, 2020.

5 Morgan Stanley. June 14, 2020. “2020 Midyear Investor Outlook: Unusual Times Conventional Playbook.” https://www.morganstanley.com/ideas/global-investment-strategy-midyear-outlook-2020. Accessed July 16, 2020.

6 Capital Group. June 4, 2020. “U.S. Midyear Outlook: From recession to recovery.” https://www.capitalgroup.com/advisor/insights/articles/us-midyear-outlook-2020.html?cid=p55731464801&ad_id=449175591351&ext_id=&gclid=EAIaIQobChMIhP_5lrLS6gIV5QiICR1QpQPREAAYASAAEgJ3UfD_BwE&gclsrc=aw.ds. Accessed July 16, 2020.

Communications such as this are not impartial and are provided in connection with advertising and marketing of the financial services offered by Guardian Capital Management, LLC. Guardian Capital Management, LLC is not an attorney or a tax professional and the information contained herein should not be considered tax or accounting advice, legal or regulatory advice. 

The information provided herein is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purposes. Accordingly, it should not be construed by any consumer and/or prospective client as solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation. Guardian Capital Management, LLC offers investment advice through Belpointe Asset Management, LLC, 125 Greenwich Avenue, Greenwich, CT 06830 (“Belpointe”). Belpointe is an investment adviser registered with the Securities and Exchange Commission (“SEC”). Registration with the SEC should not be construed to imply that the SEC has approved or endorsed qualifications or the services Belpointe offers, or that or its personnel possess a particular level of skill, expertise or training. Insurance products are offered through Guardian Resources. Important information and disclosures related to Belpointe are available at http://www.belpointe.com. Additional information pertaining to Guardian Capital Management, LLC and/or Belpointe’s registration status, its business operations, services and fees and its current written disclosure statement is available on the SEC’s Investment Adviser public website at https://www.adviserinfo.sec.gov/.

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