Not surprising the market uncertainty is expected given the outcome of both the upcoming Senate and Presidential election tomorrow due to the uncertainty over future governmental policies. The polls are suggesting the Senate outcome is very close and can going either way. Given the initial market rally measured by the September 2nd S&P 500 closing high of 3581 then declining 9% to 3270 October 30th suggests a possible buying opportunity in the weeks ahead. For now, it’s expected market volatility to continue until the “election dust settles” which could be December 2020 or January 2021.
Liquidity concerns (for cash) for market activity should remain in abeyance for an extended period given news reports that most Federal Reserve participants favor a zero – interest – rate – policy through 2023. To support this belief, they have adopted a “flexible average inflation target” earmarked at an average 2% over time. It is this Fed policy which defines the basis for the market's belief that interest rates will remain exceptionally low interest rates for the next year two. Therefore, in my opinion this bodes well for equities/stocks over low-paying fixed assets such as bonds and CDs.
Meanwhile, Congress continues to negotiate on a new round of fiscal relief/stimulus. Market attention appears to be forward-looking towards 2021 and 2022 with prospects of the economy continuing to improve over time. This forward – looking approach is believed responsible for the reasonable performance of the market during the global pandemic.
As we have all year, we prefer dollar cost averaging approach for adding to one's portfolios while being ready for possible interim buying opportunities for now.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. The information is based on data gathered from what we believe are reliable sources. It is not guaranteed by Waddell & Reed, Inc. as to the accuracy and is not intended to be used as the basis for any investment decisions. The information presented does not constitute a solicitation for the purchase or sale of any security and is not a recommendation of any kind. Please consult your financial advisor before making financial decisions.
Dollar cost averaging does not ensure a profit nor guarantee against loss. Investors should consider their financial ability to continue their purchases through periods of low price levels. The S&P 500 index is unmanaged and you cannot directly invest into an index. There is always a risk when investing. including the potential to lose principal. Generally, the greater the risk, the greater the potential reward. You should determine your risk tolerance and financial goals before deciding to invest.
Past performance is not a guarantee of future results.
(10/20)