Marks Group would like to express our thanks to clients and families we work with for your understanding and flexibility to adapt to the new realities brought upon us by COVID-19. All meetings will continue to be conducted via phone call or video conference until further notice. Our Minnetonka office remains closed to visitors, but is consistently staffed during regular business hours by a handful of dedicated Marks Group team members. The rest of our advisors and staff are working from home. While it’s unfortunate we are unable to meet face-to-face for the time being, you can rest assured all operations are running at full capacity. If you have specific questions, please do not hesitate to contact us directly.
Ben Marks, Chief Investment Officer
October 15, 2020
It appears that Americans will need to hunker down for a long winter. Any glimpse of “normal life” as we knew it before the pandemic remains a speck on the distant horizon.
With the stock market trading near all-time highs, investors have proven a willingness to look beyond the economic abyss and focus on the expected corporate earnings recovery next year. It is important to note that five mega-cap stocks – Apple, Microsoft, Amazon, Alphabet, and Facebook – now represent an unprecedented 23% weighting of the S&P 500. The outperformance of these stocks is masking a less impressive stock performance of the average company.
The difference in valuation between value stocks and growth stocks has never been greater. It is tempting to look at these deeply discounted value stocks, many with hefty dividends, as buying opportunities. Bargains can certainly be found, but investors are also faced with a minefield of companies and industries that will be forever changed by COVID. Trends that were creating industry waves have been accelerated by the virus. Brick & Mortar Retail, Oil & Gas, and Commercial Real Estate are some of the obvious victims.
We remain primarily invested in growth stocks. In this slow-growth (or no-growth) economy, investors are willing to pay a premium for companies that offer consistent earnings growth. Near-zero interest rates make stocks even more attractive compared to bonds and cash, adding fuel to the equity markets. In most industries, the biggest players with strong balance sheets will gain more market share and be even better positioned as the economy recovers.
There is no silver bullet that will cure our ailing economy. The first COVID vaccines, when readily available, may be only 60% effective and will take time to earn public trust. Many people will never get vaccinated, but real progress has been made in treating the symptoms for those already infected, making the disease less fatal and leading to quicker recoveries.
In the coming months you will likely see the acronym “FFCE”, when referring to COVID tests. This stands for Frequent, Fast (result), Cheap, and Easy. Widespread availability of such testing may be what finally allows a safe return to offices and schools. Many medical diagnostic companies are racing toward such a solution. In the meantime, innovation will be key to survival. Businesses that create a safe environment for their customers and employees will be financial winners. It is also important to recognize that COVID does not necessarily equal recession. Many businesses are thriving during this era. The economy will most likely continue to recover long before COVID can be viewed in our rearview mirrors.
With the Presidential election only weeks away, it is worth a reminder that political parties have far less influence on your investment portfolio than you might think. No matter the outcome of the November elections, there will be more massive fiscal stimulus packages coming and (likely) a huge infrastructure bill in 2021 to help jumpstart the US economy.
The biggest personal news at Marks Group is that Shelly Aeshliman will be retiring at year-end. We are happy that Shelly will be able to spend more time with her family, especially her precious grandchildren, but are sad to see her go. Shelly has been part of our team for more than twenty years. Her work ethic and sincere commitment to our clients is an inspiration for us all. Please join me in wishing Shelly a well-deserved, happy, and healthy retirement.
I encourage you to stay up to date on the markets and economy by reading our Monthly Market Recap email and regular columns in the Star Tribune. If these do not already show up in your Inbox, please let us know.
Be well and stay strong,
Ben Marks, Chief Investment Officer
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Stock prices and index returns provided by E-signal.