Similar to a marathon runner, it’s important for stocks to move upward in an orderly way so that rallies don’t burn out from exhaustion, ultimately sending their shareholders on round trips. While many will view Monday’s selloff with fear, we are embracing the quick reset in stock prices. Healthy market resets allow stocks to slow down, catch their breath, and grow into their valuations before resuming their upward trend.
Despite rising economic uncertainty and fear over a second wave of COVID-19, we continue to adjust our forward earnings estimates upward for 2021 and remain focused on stocks/businesses that are positioned to deliver durable, long term growth, while shunning areas of the market experiencing slowing growth, high debt burdens, and falling market share. The combination of cheap money, low inflation, and long term growth should act as a positive catalyst for well-positioned stocks in the second of 2020.
In today’s market review, we are going to review the Monday selloff, what it means and why it’s a healthy event for long term investors. We are also going to measure the impact of economic growth on stock market direction and what that means for portfolio construction and overall asset allocation. Lastly, we will review the health of the credit markets, along with an analysis of what a short term overbought stock market has historically meant for future investment returns when backed by strong breadth, poor investor sentiment, and a bottoming in future earnings estimates.
The information here is presented by licensed professionals and not specific to any individual’s personal circumstances. Investment advisory services offered through LifePro Asset Management, LLC, a registered investment adviser. Investments involve risk and are not guaranteed. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal any historical performance. Discussion of any specific stocks are based on objective, non-performance criteria and such discussion neither serves as a recommendation nor as the receipt of, or a substitute for, personalized advice. Due to various factors, including changing market conditions, such discussion of positions and/or recommendations may no longer be reflective of current position(s) and/or recommendation(s). Moreover, no client or prospective client should assume that any such discussion serves as the receipt of, or a substitute for, personalized advice from Advisor, or from any other investment professional. Forward-looking statements such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” are based on management’s views and assumptions at the time such statements were originally made and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. LifePro Asset Management does not undertake any obligation to correct or update any forward-looking statements on the LPAM Site.