Setting Up for Second Half Success

Have you ever taken a long road trip? Perhaps you traveled hundreds of miles, before you finally reached the halfway point. It probably felt great that you had one half behind you, but you still had another half ahead. Maybe the first part of the drive went more quickly than anticipated, or maybe you hit bouts of traffic or road construction and it took “forever” for you to reach that halfway point.

Either way, the midpoint on a trip is often a great place to take a rest and prepare mentally and physically for the second half. The halfway point is where we double check our bearings, stretch our legs, and “gear up” for the next part of the journey.

In a year marked with significant market-moving events, mainly centered around the COVID-19 headlines, now’s a great time for a quick pit stop to assess our first half travels and get ready for the second part of the journey. The long Fourth of July weekend is a great time to get some much-needed rest and relaxation, reflect on the road behind us, as well as examine the expanse ahead.

Looking back at the first half of the 2020 “road trip,” the COVID-19 outbreak brought about one of the worst bear markets since the Great Depression.  The downturn was followed by a fast recovery and the greatest 50-day market rally of our lifetimes. It has certainly been quite an eventful drive so far, and it’s time to get ready for the second half.  Our anticipation is that mental preparedness will be essential to meet the rigors of the rest of this trip.

Both the S&P 500 and Dow have rebounded impressively from the March lows. However, they are still quite a way from getting back to the February peak. We have had great road conditions since the March bottoms, but over the last couple of weeks the markets have been stuck in traffic. Last week, the S&P was down almost 3%, while the Dow fell over 3.3%. Heading into the mid-point of 2020, the S&P is down almost 7% year to date, while the Dow has dropped over 12%.

With no immediate vaccine in sight and new coronavirus cases hitting all time peaks here in the U.S., many investors fear the second half of 2020 could look just as volatile as the first. With Florida and Texas now pausing many of their reopening plans, and other states imposing new limitations, many are concerned that we could see another round of shutdowns. If we see signs of traffic and congestion on the road ahead, we may need to reroute the GPS to take another path to see second half success.

Our team has been predicting that both a W-shaped and V-shaped recovery were possibilities for the broader economy and financial markets. For certain sectors of the economy, like retail, real estate, health care, and technology, the recovery has been V-shaped: a much faster journey than expected. For example, retail sales soared by over 17.7% in May, and vehicle sales surged by over 44%. The housing market has also been red-hot, with applications for new home purchases increasing for 10 weeks in a row and back at new highs. Additionally, mortgage applications have increased by 21% compared with last year.

With interest rates expected to remain near zero percent through at least 2022, the road is paved for a great second half journey for the automotive and housing sectors. However, not all sectors are positioned for a smooth ride in the weeks ahead. Sectors like energy, travel, and banking still have a long-winding road in front of them.

The second half of our road trip will likely be traveled on a much narrower road.  Such conditions take concentration.  Investors are growing much more selective, and a flight to quality has been underway. This means fewer cars will have a smooth journey in the months ahead.  Now is the time to stay focused on the road ahead and find the best path to reach our destination successfully. We are doing this by vetting every company you own to make sure it meets our stringent moral and financial criteria, so we may honor God and be well positioned to prosper.

Road Trip 2020 delivered quite an interesting first half for investors, but, thankfully, our Guide is unfailing and will see us through to our final destination.  Like the GPS in our automobiles, we trust in the Lord when we are traveling, both literally and figuratively, especially when the travels get rough (See: Psalm 23:3-4).  Our team has plugged in the coordinates to help you reach a successful financial destination, and we are ready to take any steps needed, if the markets start to send us off course.

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

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