Volatility and Resiliency Define Market

Nicolet Wealth Management Market Update

Thank you for your continued confidence in Nicolet. As the COVID-19 pandemic continues to create uncertainty in our lives, we will work hard to provide you with timely insights on market and economic conditions.

Volatility in the capital markets remains elevated, but not nearly as extreme as the levels seen in February and March.  The S&P 500 Index, which measures the stock performance of 500 large US companies, has now rallied over 30% from the low point set on March 23rd and is now only down 8.6% from the all-time high set on February 19th.

                                               Source: Nicolet Wealth Management. Bloomberg.

The market has remained resilient despite continued negative economic data such as 36.5 million jobless claims in the last eight weeks, retail sales dropping 16.4% last month, and industrial output falling 11.2%.  The decline in economic activity has been an inevitable consequence of the efforts to lock down the country and blunt the effects of the COVID-19 pandemic.

As governors across the US end stay-at-home orders and companies develop return-to-work action plans, the pace of economic activity and concerns over a second wave of infections will have a large influence on the future direction of the capital markets.  Federal Reserve Chairman, Jerome Powell, recently captured this sentiment when he said, “the path ahead is both highly uncertain and subject to significant downside risks.”

Reasons for optimism include:

  • Low interest rates, low oil prices, and low price inflation all support consumer spending which drives the majority of the economy.
  • Fiscal and monetary policies have teamed up to provide the fastest and greatest economic stimulus and injection of liquidity in history. The Fed has made it clear they are willing to do whatever it takes to support the economy and capital markets.
  • Scientists around the world are working on potential COVID-19 treatments and vaccines.

Reasons for caution include:

  • Near term earnings expectations have been significantly reduced, leaving valuations elevated.
  • Company dividend payments and share repurchase activity have both been meaningfully reduced. Thus, lowering or even eliminating an important source of shareholder returns.
  • Healthy companies could reduce employee headcount in response to reduced economic activity and/or correct for any excess that has built up over the last 11 years of economic expansion causing unemployment levels to remain high for longer than expected.

We continue to evaluate the capital markets for opportunities and risks.  We will continue to maintain our disciplined long-term approach, and are prepared for a range of potential outcomes.  If you would like to discuss your account in more detail, please contact us at your convenience.

Nicolet Wealth Management

 

Investment and insurance products:

Are Not FDIC Insured
May Lose Value
Are Not Bank Guaranteed
Are Not Deposits
Are Not Guaranteed by Any Federal Government Entity
Are Not a Condition to Any Banking 
Service or Activity

Nicolet Wealth Management is a brand name that refers to Nicolet National Bank and certain of its departments and affiliates that provide investment advisory, trust, retirement planning and insurance services.

Nicolet Advisory Services, LLC, is an investment adviser, registered with the U.S. Securities and Exchange Commission, and an affiliate of Nicolet National Bank.  Nicolet Advisory Services, LLC recommends the brokerage and custodial services of TD Ameritrade, Inc., member FINRA/SIPC.  TD Ameritrade is not affiliated in any way with Nicolet National Bank or its affiliated companies.

Trust services are offered through Nicolet National Bank, a national bank with trust powers.  Trust services utilizes SEI Private Trust Company (SPTC) as its custody provider.  SPTC is not affiliated in any way with Nicolet National Bank or its affiliated companies.