Broker Check

Where Do We Go From Here?

As we reach the halfway mark of an unprecedented and volatile year, the task of analyzing the current and future state of the economy and the impact on the financial markets takes on added importance.  In particular, an in depth assessment of potential pitfalls and opportunities is crucial to effectively managing investment portfolios during these uncertain times.

When the pandemic exploded on the scene in March, the stock market went into a free fall declining more than 30% in just a few weeks.  Perhaps more importantly, bond prices plummeted as liquidity in these markets quickly froze.

The Federal Reserve responded expediently and forcefully by slashing interest rates and providing the liquidity necessary to stabilize the bond market.  These actions served their purpose and the bond crisis ended quickly. 

As I described in one of my emails, Congress subsequently passed the CARES Act which provided substantial relief to most taxpayers in the form of expanded unemployment benefits and a $1,200 stipend.  Quite unexpectedly and welcome, the stock market surged resulting in one of the best performances in years during the second quarter. 

Technology stocks have continued to soar while most equities have been in a holding pattern over the past month or two.  The weighted market capitalization and strong performance of the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) plus Microsoft have significantly skewed aggregate returns in the  equities market, but, generally, the year to date declines for the entire stock market hovers in the mid single digits.  There is an apparent disconnect between this relatively small decline and the serious damage inflicted on the economy and the likelihood that this deterioration will linger and, perhaps, worsen until a vaccine for Covid 19 becomes readily available. 

When perusing the landscape, I find it difficult to remain optimistic that the stock market will continue to rise particularly if shutdowns renew in states with escalating Covid cases.  It is reasonable to speculate that another precipitous decline in the stock market is possible if the economy is subject to additional stress. 

The counter argument is that the continuation of historically low interest rates, backstopping created by favorable fiscal and monetary policy from Washington and the entry of millennials who increase volume/demand by trading equities on low cost platforms such as Robinhood will continue to bolster the stock market. 

Since many of my clients are near or at retirement, safety remains the top priority but it needs to be complemented with a moderate growth strategy that is designed to lengthen income over extended life expectancies.  I continue to analyze hedging strategies that address these dual objectives and will prudently introduce strategies to portfolios that I determine to be beneficial.

In the meantime, please do not hesitate to reach out to me about specific details in your portfolio.  Enjoy the remainder of the summer and please stay safe.




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Clifford L. Caplan, CFP®, AIF®                                                                        Stephen Caplan, CSLP®   


In The Media:  Available recently on YouTube, I was interviewed about the changes and benefits that result from the SECURE Act passed by Congress in 2019.  This legislation represents one of the most significant changes in years affecting retirement plans.  The link is