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Hear from Chief Investment Officer Jesse Mackey in this week's Market Perspective.
I’m Jesse Mackey, CIO of 4Thought Financial Group, and this is 4Thought’s Weekly Market Perspective for the week of September 22nd, 2020.
As of yesterday, the S&P 500 Index had experienced a downward correction of just over 10% from its recent September 2nd record peak price (as measured on an intraday basis). Preceding this move, the rapid recovery from the 2020 Bear Market low point on March 23rd (at which point the S&P 500 had dropped more than 34% from its previous peak) met our technical definition of a new Bull Market.
Historical data indicates that once a new Bull Market has been confirmed (which happened on August 18th), the shortest time period on record (since 1950) before the beginning of another Bear Market was approximately 4.4 months, and the longest time on record was approximately 10.7 years, with the average coming in at about 3.2 years. Only 35 days have elapsed from the point of Bull confirmation in this instance so far. In addition, there has usually been at least one 10%+ correction (but often several) between most bear markets in history. In fact, the only exception to this since 1950 was the bull market time period between December 2018 and February 2020, during which no 10%+ correction occurred.
From a probabilistic analysis perspective, stock types range from slightly undervalued (such as with mid cap stocks) to moderately overvalued (in the case of large cap growth stocks). Bond types range from near fair value (in the case of emerging markets bonds) to slightly overvalued (in the case of Treasury Inflation Protected Securities). Against this backdrop the outlook for stocks is now neutral to positive in the intermediate term based on the overall aggregate of our historical market-type data analysis and quantitative probabilistic analysis.
Treasury Inflation Protected Securities are now the best performers so far in 2020, while US small cap stocks show the worst year-to-date performance. US mid cap stocks now reflect the most attractive pricing relative to the alternatives, while US large cap growth and tech stocks are by far the least attractive. With regards to allocations amongst investment methods, we are now allowing overweight allocations to Liability-Driven Investing, neutral allocations to Strategic Asset Allocation, and underweights to Selective/Concentrated Investing, and Opportunistic Investing.
I hope this was helpful. If you have questions or you’d like to discuss how to implement any of this, please contact 4Thought at 516-300-1617 or at email@example.com – and don’t forget to subscribe to our blog feed and our YouTube channel. Thanks for watching, and see you next week.