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Investment Letter

2nd Quarter 2020

The first half of 2020 will be remembered as one of the most difficult periods in recent history. The COVID-19 pandemic and social distancing response triggered a deep economic recession that altered the way we work, learn, care for each other, raise children, and enjoy life. There are many question marks about the future, but we are certain the past six months will have a long-lasting human and economic impact. Given the current environment, we suggest the best way to navigate the remainder of the year is by prioritizing health and safety in your personal and financial lives.

The financial markets rebounded during the quarter thanks to the massive fiscal and monetary stimulus packages. The 2nd Quarter total return of 20.54% for the S&P 500 Index was the best quarterly return since 1998 and a contrast from the -19.60% 1st Quarter total return. A remarkable rally in the face of turmoil and uncertainty. The tech sector led the advanced as new technology approaches to work, shopping, socializing, and entertainment were implemented. As a result, the NASDAQ index rose over 30% during the quarter to set new all-time highs and finish up +12.11% year-to-date.

The tables below illustrate the point gain/loss and total return for the major indices in 2020.


Stock Indices












S&P 500












Russell 2000












2020 Total Return Index Performance

Asset Class





BofA/ML Three-Month U.S. Treasury



U.S. Bonds

Barclays Intermediate-Term Treasury



U.S. Large Co. Stocks

S&P 500



U.S. Small Co. Stocks

Russell 2000



International Stocks

MSCI EAFE (net div.)



Real Estate

DJ Select Real Estate Securities Total Return



Source: Morningstar


The National Bureau of Economic Research officially declared an economic recession in early June due to the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy. Hopefully, the worst part of the economic recession is behind us, and we expect the data will point to April 2020 as the trough of the new economic cycle.

Major economic points during the quarter included:

1st Quarter GDP decreased 5%.

1.2% Consumer Price Index (CPI) less food and energy and 0.1% CPI (all items) over last 12-months ending May.

Federal funds rate target range unchanged: 0.00 – 0.25%

June nonfarm payroll employment improved. Unemployment rate 11.1%.

Manufacturing activity grew in June - second month of growth.

Existing-home sales fell 9.7% in May, marking a three-month decline.

Oil prices recovered from low points during the quarter.


At the Federal Open Market Committee (FOMC) meeting in June, the Fed confirmed the coronavirus outbreak was causing tremendous human and economic hardship. To support the U.S. economy, the FOMC stated they are committed to using a full range of tools during these challenging times. The Committee decided to maintain the current level of the federal funds rate until they are confident the economy has weathered recent events. In addition, the Fed agreed to continue their expansionary policy stance with purchases of Treasury and agency security holdings. They also determined it was appropriate to continue offering large-scale overnight and repurchase operations to support the smooth functioning of short-term funding markets. To further promote the Committee’s goals of maximum employment and price stability, economic developments will be closely monitored for appropriate policy actions. 

Our outlook for the remainder of the year is guarded. We recognize deep recessions do not disappear quickly. The economic damage to jobs and growth was significant, and it will take time to fully recover. We do expect conditions to improve slightly, but the economy will not make significant strides forward until people go back to work full-time and social restrictions are reduced. We are hopeful that a vaccine will help fix many issues, but until then we all must adapt to this new environment. We expect the Fed to continue the economy support with highly accommodative monetary policy until further notice. Large balance sheets and low rates will be the new normal for at least another year. Another round of fiscal stimulus may be coming in the next few months if politicians can agree on the size and scope. The problem will be balancing budget austerity versus providing the necessary economic support.

There are some significant short-term economic risks for the remainder of 2020. The COVID-19 “Second-Wave”, the November election, and tension with China could all be strong headwinds for the economy. Hopefully, all three will have minor impacts, but it is prudent to be prepared. We are keeping a watchful eye on risks and opportunities as they develop.

We mentioned this in last quarter’s letter, but it deserves to be repeated. A great tip for investors during volatile and uncertain times is to simply hit the pause button and take a deep breath. The economy has a lot of pent-up unanswered demand, and financial markets will eventually recover and flourish. We have been here before and survived.

Here are some additional tips to help mitigate market volatility.


•         Stay calm

•         Remain invested

•         Maintain a diversified portfolio

•         Monitor your investments

•         Understand your risk tolerance

•         Set realistic expectations

•         Consult your financial advisor periodically to make sure you are on track



•         Panic

•         Make emotional investment decisions

•         Attempt to time the market

•         Lose focus of your long-term financial goals


As I have often stated, our investment philosophy remains based on the fundamentals. We believe it is time---not timing---that matters most. The successful long-term investor is patient, weathers market swings, and adheres to a disciplined investment process. 

Over the course of a lifetime, financial goals and objectives change and evolve. A financial check-up can help evaluate your financial health, highlight adjustments needed, and develop and implement a plan for success. If you would like to discuss changes to your financial situation, schedule a virtual meeting, or have any questions, please contact our office.

In closing, I want to thank you for the opportunity of working with you and for your continued confidence and trust. I wish you and your family good health.

With kindest personal regards, I am

Very truly yours,



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