What's Going On?

Carolanne M. Chavanne, CFP

You can’t blame Marvin Gaye for asking, since we are two-thirds of the way through one of the craziest years ever for the US stock market, the American economy, and honestly, each one of us.  The stock market’s movement in the first half of 2020 was a roller-coaster, full of steep climbs and sharp drops, only to climb again. Consider that:

  • It took 22 days to end the longest bull market on record
  • Then only 15 days(!) for the bear market to run its course
  • The US economy lost 40 million jobs in 4 months (Jan – Apr)
  • Yet nearly 10 million jobs have been added in the last three months
    - May +2.7 million
    - June +4.8 million
    - July +1.8 million
  • Meanwhile, with all of this happening, the NASDAQ climbed +11%    

So, what is actually going on?  In the midst of so much bad economic news, how can the markets be so strong? The simple explanation is this: the US economy is not the stock market, and the stock market is not the US economy.  One very important difference between the two is in the area of market capitalization (i.e., the total dollar market value of a company’s outstanding shares of stock).  Mega-cap technology companies – Facebook, Apple, Amazon,  Microsoft, and Google –  had significant growth during the pandemic.  Also, consider that these four industries –internet content, software infrastructure, consumer electronics, and internet retailers – account for approximately a quarter of total US stock market value.

1 Visual Capitalist

If you were to assign equal weight to each stock, the 10 most prominent tech companies in the S&P 500 are up more than 37%, while the remaining  490 names are down about 7% year-to-date.  No wonder the NASDAQ, which is dominated by big tech companies, is up so much this year.  And by the same token, the strong performance of the Big Tech companies also carried the S&P 500 to record highs.  

2  Source: Statista 

So, maybe the markets aren’t as crazy as we thought, they are just driven by different factors.  This highlights the importance of reviewing your investments with an open mind to new developments and being ready to adjust them accordingly.  Please contact us at carolanne@prosperitywealthplanning.com to schedule a fourth-quarter appointment and discuss your current situation.  

Timely Tips 

  • Account Rebalancing – with the markets hitting all-time highs, now may be the time to evaluate your overall investment allocation against your risk tolerance or comfort level.  Your asset mix may have gotten a bit more heavily weighted into stocks based on the record performance, and we may need to adjust accordingly.

  • Roth Conversions – typically, it's best to consider Roth IRA conversions when the markets are down, so perhaps not now.  An exception to this rule would be if we know your tax bracket may be higher in later years, and we want to lock in the current lower tax bracket on the conversion now. Let's discuss it!

  • Sector-specific investing – we highlighted the terrific performance of the technology sector above.  Are you wondering if you own any of these stocks? I'm happy to evaluate your portfolio to see if we should be adding technology or perhaps considering another sector. 

Financial Planning Articles of Interest

Visit our website at  ProsperityWealthPlanning.com, and follow us on Facebook and LinkedIn, to get updated articles of interest and financial planning tips.    

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News and Upcoming Events

  • September - Start thinking about Year-end tax planning
  • September 15 – Estimated Tax Payment Due
    Third-quarter estimated tax payments due for self-employed and those who do not pay enough through paycheck withholdings.
  • October 1 – The first day to submit FAFSA (Free Application for Financial Aid) for those attending college in 2021.    

Finally, if you would like to schedule a meeting, or if you know someone who is looking for some financial planning assistance, please email me at carolanne@prosperitywealthplanning.com

Until next time, let's work together to keep both your attitude and your financial prospects positive.  And even though there is a lot going on in the world today, let's all stay connected to those we love and thankful for every day we have.

Stay well,  



1 https://www.visualcapitalist.com/the-stocks-to-rule-them-all-big-techs-might-in-five-charts/

2 https://www.statista.com/chart/20939/year-to-date-performance-of-major-us-stock-market-indices/

By Carolanne M. Chavanne, CFP

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