In today\u2019s Steady Investor,\nwe look at key factors that we believe are currently impacting the market and\nwhat could be next for the markets such as:<\/p>\n\n\n\n
Steep Q2 GDP Declines\nAcross the World \u2013 <\/strong>Developed countries felt the pain in the second quarter,\nwith economic activity contracting steeply across the board. According to the\nOrganization for Economic Cooperation and Development (OECD), the combined\neconomic output of its 37 members (which are all relatively wealthy countries)\nfell -9.8% quarter-over-quarter, which marks the worst decline in output since\nrecords started in 1960. For context, the largest decline produced by the Great\nRecession was -2.3% in 2009, which pales in comparison to the Covid-19 impact.\nHere in the U.S., the Bureau of Economic Analysis released its second estimate\nof Q2 GDP, indicating a -31.7% annual rate of decline coming off a -5.0%\ndecrease of real GDP in Q1.1<\/sup> It may be hard to believe, but there is\nactually good news in these numbers. For one, they are all backward-looking,\nwhich means they have basically no effect on the economy or markets going\nforward. Second, a steep contraction usually offers easy comparisons for a\ngrowth rebound, which we believe we will see in the third quarter. <\/p>\n\n\n\n _______________________________________________________________________<\/p>\n\n\n\n How to Protect Your Assets in the Next Bear Market<\/a><\/strong> _______________________________________________________________________<\/p>\n\n\n\n Inside the Fed\u2019s New\n\u201cFlexible Inflation Targeting\u201d \u2013 <\/strong>Fed Chairman Jerome Powell gave a speech\nthis week that marked a material shift in the Federal Reserve\u2019s monetary policy\nstrategy (and goals). Chairman Powell indicated the Fed would be implementing a\n\u201cflexible form of average inflation targeting,\u201d which is a convoluted way of\nsaying that the Fed will pursue an average 2% inflation target over time. The\nunderlying implication here is that the Fed is now increasingly willing to\nallow inflation to drift above 2% for \u201csome time,\u201d given that inflation has\nbeen running under that target for such a sustained period.3<\/sup> That\u2019s\nwhere the \u2018average\u2019 comes in. The Fed\u2019s stance means, in our view, that we can\nexpect to see sustained low interest rates for at least a few years and\npossibly more asset purchases in the near to medium term. Until the\nunemployment rate falls back to a near \u2018maximum\u2019 level \u2013 call it 3% \u2013 we can\nreasonably expect accommodative monetary policy.<\/p>\n\n\n\n Housing Market Strength Continues Apace \u2013 <\/strong>The U.S. economy is recovering steadily \u2013 if not a bit unevenly \u2013 but one area that continues to demonstrate durable strength is the housing market. Perhaps this trend was to be expected in the wake of the pandemic, as people seek out bigger spaces for working and schooling at home and migrate out of city centers. Sales of new single-family homes jumped 14% month-over-month in July, hitting an annual pace of 901,000. This strength in the housing market puts it at a level not reached since before the housing bubble burst in 2005. Interestingly, much of the new growth is being driven by millennials, who previously had been reluctant to enter the housing market as family formation lagged and as renting was favored. For the first time, millennials accounted for over 50% of new home loans. Supply of homes remains tight and prices are rising.4<\/sup><\/p>\n\n\n\n Global Trade Keeps Sinking \u2013 <\/strong>The United States\u2019 revived embrace of protectionist policies started a tailwind against global trade that has been accelerated by the pandemic. Global trade dropped by the most in 20 years as supply chains were compromised and demand for consumer and investment goods waned. Corporations are also rethinking supply chains in the wake of the pandemic, which ultimately contributes to one-third of total trade. A European Bureau of Economic Policy Analysis showed that the flow of goods across borders was 12.5% lower in Q2 from Q1.5<\/sup> The path to recovery for global trade is less clear than economic recovery on the country level.<\/p>\n\n\n\n At the beginning of this year, we were still in the longest\nbull market. But the pandemic led to what could be one of the shortest bear markets in\nhistory. This year has shown us just how quickly the stock market can change\nand proven just how critical it is for investors (especially those in or near\nretirement) to know how bear and bull markets work. \n\nTo\nhelp you understand market downturns and steps you can take to protect your\nassets during the next bear market, you\u2019re invited to get our free guide\n– Everything You Need to Know\nAbout Bear Markets<\/em>.6<\/sup> GDP decline 3x worse than Great Recession, Fed shifts to \u201cflexible inflation targeting\u201d, plus more<\/p>\n","protected":false},"author":3,"featured_media":7426,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71,73],"tags":[],"class_list":["post-8827","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-private-client-group","category-steady-investors-week"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8827","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8827"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8827\/revisions"}],"predecessor-version":[{"id":10551,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8827\/revisions\/10551"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8827"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8827"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8827"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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The pandemic ended what was the longest bull market in history and caused what could be one of the shortest bear markets. And while it may be over, volatility is likely to persist for some time. This year has proven just how quickly things can change. That\u2019s why there is no better time for investors to gain a better understanding of bear markets and how they work.
\u00a0
To help you understand market downturns and steps you can take to protect your assets during the next bear market, you\u2019re invited to get our free guide –\u00a0Everything You Need to Know About Bear Markets<\/em>.2<\/sup>
\u00a0
If you have $500,000 or more to invest, get this helpful guide today. It walks through the history and types of bear markets, how investors typically react to extreme volatility, and what we can learn from the history of bear markets and pandemics.
\u00a0
<\/a>Download –\u00a0Everything You Need to Know About Bear Markets<\/a><\/strong><\/p>\n\n\n\n
\nIf you have $500,000 or more to invest, get this\nhelpful guide today. It walks through the history and types of bear markets,\nhow investors typically react to extreme volatility, and what we can learn from\nthe history of bear markets and pandemics.
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