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The first three months of the year turned out to be very favorable for stocks. The S&P 500 had a Total Return (TR) of 6.17%, while the Dow Jones Industrial Average led the way up 7.76% TR and the tech-heavy Nasdaq Composite posted a gain of 2.95% TR.
The U.S. equity markets continue the bumpy ride this week as rising yields continue to weigh on stocks. On Thursday, the S&P 500 was down 1.34%, while the tech heavy NASDAQ Composite decreased 2.11%.
The 10-Year U.S. Treasury Yield has been on the rise since the summer and over the last 30 days, it has spiked up very quickly. That has spooked the stock market and has led to big down days, like yesterday.
Yesterday afternoon the Surevest Investment Committee had the pleasure to be part of a small group that enjoyed a live video conversation with Dr. Ben Bernanke. As many of you are aware, Dr. Ben Bernanke served as the 14th Chair of the Federal Reserve from 2006 to 2014. Most importantly, he is one of the top authority figures when it comes to crises as he studied the Great Depression and was the man in charge during the financial crisis of 2008-2009.
Coming into 2020, many investors and analysts were expecting increased market volatility given it was a presidential election year. On top of that, the prior year delivered stellar returns with the S&P 500 Total Return Index up 31.49%. With that backdrop, investors were unnerved and many contemplated selling their holdings and going to cash. Not very long into the year, news broke out of a virus in China, but the U.S. markets shrugged it off as an isolated event and markets continued forward to make new highs. It was not until it was announced that the virus was turning up in Europe and people infected had no direct contact with anyone from China that then the markets began to realize this was not an isolated event.
Two giant companies had extremely successful initial public offerings this week. DoorDash, the food delivery service business, ended their first day of trading with an 85% increase, and Airbnb, the online vacation rental company, skyrocketed 112%.
A unicorn is a common business term used to describe privately held startup companies valued at more than $1 billion. To be on this list is quite the accomplishment, but it does not do justice to the market capitalization of DoorDash, which closed its first day of trading with a fully diluted market cap of $72B and Airbnb with a fully diluted market cap of over $100M[i]
The third quarter has ended following a roller-coaster ride of volatility for investors. Be that as it may, the S&P 500 returned an impressive 8.47% during this period. August saw the best month dating back to the mid-1980’s, and while the markets tumbled in September down 3.92%, it finished off the month with a rally of almost 4% during the last five trading days of the quarter.
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The month of September continues to bring us increased volatility and a down market. Through Thursday’s market close, the S&P 500 is down 7.15% and now putting the index up only 1.90% Total Return year-to-date. This has led investors to ask if this is the beginning of a big market sell off.