North American markets today, Wednesday, appear poised to open on a negative note with major indicators firmly in the red at time of writing. That follows yesterday’s closing with the S&P 500 and NASDAQ at record highs. “There is this optimism about what it means as we see news around vaccines emerge,” said Bill Northey, senior investment director at U. S. Bank Wealth Management in a Reuters report.
Still, the indecision over a stimulus plan overhangs these markets, including the uncertainty of agreement over the breadth, size and timing of the much-needed economic rescue and the deeply troubling daily reports of surges.
European markets are open at time of writing and major indicators there are mixed with the CAC 40 and DAX in the red while the FTSE 100 is in the green. That continues yesterday’s optimism on the European bourses, grounded in several factors, including China’s recovery, according to Chris Beauchamp, Chief Market Analyst at IG Group, a London brokerage firm.
Beauchamp sees the FTSE 100 as a kind of weathervane on global markets. “As a global index and not one just focused on the UK, the FTSE 100 is well placed to benefit as China recovers,” he explains. “And the rest of global economy moves slowly toward the post-virus world.”
And as I write this column, the FTSE 100 is bolting with the breaking news that the United Kingdom has granted emergency authorization to Pfizer’s coronavirus vaccine.
The pandemic has wrought huge amounts of bad news for investors, but tomorrow’s reports may produce two further glimpses into positive news. Dollar General Corp. releases its third quarter results, and it is possible that rocketing unemployment (and fears of unemployment) pushed more consumers towards bargain-basement priced goods. The Kroger Company also releases its third quarter results tomorrow, and likely will report sales increases due to the pandemic.
The logistical execution of vaccine distribution could be a Herculean task but saying for the moment that at least some promises by governments and pharmaceutical companies crystallize, investors will face a range of questions in the post-COVID 19 world.
Beauchamp’s remarks point to a larger market reality. There are enough of these questions to sustain several of these columns. In the big picture, investors need to develop strategies for managing through the bumps in a way that is not punishing to their longer term returns or income needs, suggests Drummond Brodeur, Senior Vice President and Global Strategist at Signature Global Asset Management, a division of CI Global Investments Inc.. Brodeur says this is not easy but doable.
The pattern of pullbacks and recoveries appears likely to continue, he says.
For investors, this means looking past the day’s tumult and keeping a tight focus on personal financial needs. “What really matters to most people is (how) you compound your savings over a 5, 10, 15- year period” he says.
That is much more important than what happens in the markets today and tomorrow.
Whether the net effect of the rush to bring a vaccine to market will lead to an unleashing of postponed spending and investing also looms large on the list of questions. “As we look toward a health solution, we could be sitting on a coiled spring of economic activity, but it could take a while for it to be unleased,” says Northey in the same Reuters report.
The place of the cloud in investment portfolios also needs serious examination, especially considering the most recent takeover. Yesterday, Salesforce.com Inc. made its takeover of Slack Technologies Inc. official in a $27.7 billion dollar deal driven by the company’s desire for greater cloud presence. According to Dan Ives, Equity Research Director at Wedbush Securities in New York, the core reason for this deal is an attempt to keep pace with Microsoft Corp. which he terms ‘the cloud behemoth’. “Microsoft with its Azure/Office 365 cloud stack and Teams Enterprise message solution set has dominated the cloud over the past few years,” he says. The deal, which Ives characterizes as a ‘a shot across the bow at Microsoft’ will help Salesforce build out its cloud capability.
On a more individual level, the forced early retirements, furloughs, layoffs and other work world changes will force many individuals to re-think their retirement plans. However, earlier calculations based on assumptions about income, lifestyle and assumed salary may have become outdated in the meantime. In a very workable strategy, an investor approaching retirement --- forced or otherwise –- can ask his or her financial advisor for a new or revised estimate of what can be drawn from all retirement income sources, exclusive of taxes, on a monthly basis to age 95. Seeing that figure in black and white will help crystallize questions about whether changes to retirement plans have become necessary.
These are only some of the investment questions resulting from the COVID 19 crisis. It’s not going to be easy. I’m reminded of the words of the Ryan Gosling character in Blade Runner2049: ‘Buckle Up’.