Stock Market News Offers Unparalleled Opportunity for AdvisorsAdvice to the Advisor
With bad news abounding—the escalating number of confirmed virus cases and deaths, unemployment, and falling corporate earnings—how could stock market news possibly have included several sharp upswings? “Markets don’t need good news to advance,” explains Sheaff Brock Managing Director Dave Gilreath, “only an inkling of better news.” Stock market prices are predictive, Gilreath adds, often moving up on anticipation of better news.
In times of turmoil, clients turn to their advisors as Subject Matter Experts (SMEs), craving to be assured that past investment “truths” will hold true once again. In fact, a look to the past can offer more than a modicum of reassurance. Back in 2009, Gilreath recalls, after Congress approved the TARP bill and relieved accounting pressures on banks, the stock market turned upward quickly. Today (with the banking industry in a very strong position), the government is in the process of providing an unprecedented level of help to business owners and individuals. Policymakers’ statements that they are willing to do “whatever it takes” offer more than just an inkling of optimism, with the initial announcements reflected in stock market news of a rather dramatic, albeit temporary, multiple-day climb.
Market volatility levels themselves are providing yet another glimmer of optimism based on history. In the past, Gilreath recalls, situations in which the S&P 500 drifted lower even as volatility was paradoxically decreasing have signaled a market bottom. So, have we indeed reached the bottom of the market? Needless to say, no advisor can offer a definitive answer. Understandably, attempts to offer such answers abound, including these two examples:
- “While further US stock market declines are quite possible or even likely, my technical work suggests that the momentum of this decline may diminish in the weeks ahead,” comments Urrien Timmer, Director of Global Macro for Fidelity Management & Research. He sees current readings as “consistent with a market in which the bulk of the declines have already occurred, as opposed to one where they are yet to come.”
- Brian Wesbury, Chief Economist of First Trust Portfolio, puts it this way: “This market has already priced in most of the decline.” As data lends certainty, stock market news will report a market upturn before the coronovirus cases peak.”
One lesson from the past that has proven itself time and time again, Gilreath reminds investors, is that timing the market is often a fool’s errand. “Pulling out” as a portfolio “safety measure” can mean missing days in the market, which can wreak havoc with long term returns. In fact, some of the biggest market returns (as shown in the chart below), have been clustered around big market sell-offs.
Investors, particularly now that so many are at home, are being bombarded with stock market news and commentary from a plethora of sources. What investors so sorely need from their advisors may not be more of the same. Writing in Financial Planning, columnists Michael Kitces and Carl Richards urge financial advisors to “not just tell clients to stay the course, but to show them that you, as the advisor, are on the case and managing their situation.” Richards recommends a weekly roundup of the top articles you are reading that you think your clients would appreciate.
Following that very line of thought, our Sheaff Brock newsletters, blogs, and advisor memos are designed to help you frame (for both your clients’ and your own benefit) stock market news with a financial planning viewpoint.
COVID-19 has actually provided the opportunity for advisors to demonstrate thought leadership.