The second quarter in the investment markets has brought a swift rebound from the March lows but the accompanied surge in COVID-19 cases has led to a pause in the reopening of many states. This reversal not only slows the economic recovery in the US, but also adds to our personal fatigue. How long will this virus be with us? When can we get back to our normal lives? Here are a few thoughts as we move into Q3 and beyond:
While the timing of a vaccine is still largely unknown, the development process has been accelerated at the fastest pace in history. There are currently over 150 candidate vaccines in differing stages of development. Companies leading the way are Regeneron, who is already in phase 3 of clinical trials, and Moderna, who is scheduled to start phase 3 at the end of July. This means their vaccines have been effective at generating an immunity to COVID-19 as they also continue to expand their research around potential risks associated with the vaccine. Most experts are still predicting the end of the year or early 2021 as a possible timeframe for mass production to begin. The global effort to solve this problem gives us hope we will see a vaccine and it will be effective against this virus. The challenge is nobody can predict, with any accuracy, exactly when that will be. But we will likely overcome this virus and move beyond this current state of lockdown.
The same thing can be said for the investment markets. We are fatigued by the recent volatility and the unknown of when the economy will return to a more normal state. Early on, many predicted a V shaped recovery with a jump in economic activity in Q3. Today, it looks more like late in the year, possibly into 2021 before we see significant changes. Nobody can predict exactly when the economy will recover, but this is when you are rewarded for owning stocks for the long-term. All this uncertainty can wear you down and might even cause you to want to throw in the towel. The media continues to sell a story of doom and gloom but as long-term investors we must filter out the noise and look beyond the current circumstances. With a 10-year US Treasury bond paying just .62% (yes that is less than 1%), we believe stocks are the best way to beat inflation over the long-run. We know it can be exhausting but we believe you will be rewarded for your patience.
The last four months have tested all of us on many levels. Personally, professionally, spiritually and emotionally we have had to respond to the situation and decide what is most important to us and our families. Our hope is that we can help you move forward in a healthy way so we can all focus on those items we can control. In doing so, we will likely come out of this better on the other side.