Daily Capital

Weekly Market Digest: The Fundamentals of Why We Take Risk

U.S. and Foreign equities markets closed modestly down Friday, with Gold and 10-year treasuries providing a lift for individuals with well diversified portfolios.

Q1 Earnings reports continued this week with COVID-19 driving significant variation from the norm for many companies –Delta Airlines reported a quarterly loss in Q1 while expecting a 90% decrease in revenues in Q2 and Netflix reported a significant increase of new subscribers.

The Tool To Beat

The U.S. Federal Government worked towards a second stimulus bill, with more payments being made available to small businesses as a result. Meanwhile some large publicly traded companies came under scrutiny for tapping into the first round of subsidized business loans, and some such as Ruth’s Chris Steak house, and Shake Shack, have said they will return their loans to the Federal Government.

Weekly Returns

S&P 500: 2836.7 (-1.3%)
FTSE All-World ex-US(VEU): (-1.0%)
U.S. 10 Year Treasury Yield: 0.60% (-7.08%)
Gold: $1,727.08 (2.6%)
EUR/USD: 1.082 (-0.5%)

Major Events

  • Monday – Futures prices of oil crumbled into negative pricing as contract sellers attempted to offload contracts that would force them to take possession of the commodity.
  • Monday – President Trump announces plan to halt immigration into the United States as a result of COVID-19.
  • Tuesday – Netflix reports a surprise increase in new customers, more than double their Q1 forecast at 15.8 million new customers.
  • Wednesday – Delta Airlines reports a quarterly loss in Q1 and sets expectations of a 90% decrease in revenues in Q2 2020.
  • Thursday – Labor Department reports 4.4 million additional applications for unemployment benefits from last week. Total fillings have now reached over 26 million over the last 5 weeks.
  • Friday – Another stimulus bill was expected to be signed into law by President Trump, positioning nearly $500 billion aside for business loans including specific amounts for hospitals and smaller, local, lending groups.

Our Take: The Fundamentals of Why We Take Risk

The full impact of the Coronavirus remains a substantial unknown, and with another week passing it seems that uncertainty has become a greater constant in all our lives. How long will my work situation be this way? When will I be able to go to a restaurant, or a sports event? How will this impact the economy, and by way of that, my retirement?

This uncertainty has caused one of the most volatile reactions in the stock market in living memory, but there’s a large positive that’s worth reminding ourselves of: while the world will not go unchanged as a result of this new virus, people across the world will still look to improve their personal standing.

This bodes well for the global economy in the long run and is an excellent grounding concept amidst these uncertain times.

That said, many still question what they should be doing with their investments. Is now the right time to invest? What stocks are best positioned to succeed in this market?

Rather than spinning your wheels on these questions that cannot be definitively answered, focus on what you can control. Specifically, risk – taking risk is what provides investors with the potential for return. No risk, no reward, or otherwise said, no pain, no gain. This year, taking risk has been painful, but we believe as long as people across the world work to improve their personal standing, they, and the companies they work for, will be rewarded for taking risks with growth in value, and their investors along with them. All it is, is a matter of time.

We hope you stay safe and healthy as we all weather these unusual times.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Paul Deer, CFP®
Paul is a Certified Financial Planner® and has been with Personal Capital since they first moved to Denver in 2013. With over a decade of industry experience, Paul’s current role as Director of Advisory Service keeps him focused on a team of over 60 Financial Advisors and their clients.

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