The S&P 500® Index declined 2.2% on Wednesday, and is down nearly 18% from its peak in February. “Stocks are unlikely to experience a sustained rebound until the pace of new COVID-19 cases begins to slow and there are notable steps toward developing a vaccine,” says Schwab Chief Investment Strategist Liz Ann Sonders.
Some countries that experienced the novel coronavirus earlier than the United States are beginning to reopen their economies, and investors are watching closely to see how those re-openings progress. And President Trump is determined to open the US economy sooner, not later.
Short-term Treasury yields are likely to remain low as investors seek safety and liquidity, says Kathy Jones, Chief Fixed Income Strategist for the Schwab Center for Financial Research. The Federal Reserve has taken unprecedented action in recent weeks to support the economy and provide liquidity to financial markets, which has helped to stabilize fixed income markets, according to Kathy.
“Fiscal and monetary policy are providing support for most bond markets—particularly investment-grade corporate bonds and short-term municipal bonds,” Kathy says. “The Fed’s purchases of corporate bonds has helped bring yields down from peak levels and opened the door to new issuance. Direct grants to states along with Fed’s purchases are positive for the municipal bond market—although there is a good chance more will need to be done.”
The global downturn has been sharp, but it may also be short according to many experts.
A steep decline is painful, but a decline of almost any amount can be handled by a long-term investor if it doesn’t last for a long period of time. The 2000–2002 and 2007–2009 bear markets were lengthy in addition to being deep.
It’s a good idea to rebalance your portfolio periodically to bring it back to your original asset allocation targets (BayRock offers a Portfolio Checkup tool to help with this – simply go to KnowRiskInvesting.com).
