Investment Update June 2020 – what is up with the stock market?

We’ve had three months of lockdown in the US, where the economy has been throttled, followed by a week of people trying to burn the major blue cities to the ground (and doing significant economic damage to those cities). GDP is supposed to take a beating for 2nd quarter in the US. Yet the markets keep shooting up, and they are close to returning to their all time highs of late December. What the heck?

If there was ever a time which showed that the stock market is not the economy. The economy is going to be hurt for 2020, but it appears the market may rebound.

I have my own personal theories on this, which include:

  1. Everyone who can continue to work is, and they have automatic deposits set for their 401Ks, IRAs, etc. The result is that money continues to flow into the market no matter what, driving the prices up.
  2. A lot of folks sold off and dropped to the sidelines and cash, but with the US Federal Reserve dropping rates, they aren’t getting anything for their money is the “safe harbors” of savings or bonds. They are being forced (kicking & screaming?) back into the market

Either way, the markets continue to jump up, even as the overall economy appears to suffer. We will see how that goes in the months ahead. For now, May was as kind to our investments as April – things appear to have rebounded nicely.

As you know, the allocation for my retirement accounts (IRAs, 401K, etc) is pretty much index funds, spread out between the  S&P 500, small-cap, international, REITs and bonds. Due to this allocation, I didn’t get hit as hard as some folks in March or in late 2018 – but I also didn’t get as big an “upside” in 2019 either. It all depends on your risk tolerance.

Retirement Accounts: Remember, my allocation for these is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund

My 401K doesn’t have REIT option, so its just 25% for each.

Growth for May

  • S&P500: +4.8%
  • Small Cap: +7.7%
  • International: +4.8%
  • REITs: +1.7%
  • Bonds: +0.5%

My dividend account new allocation (as of Jan 2020) was:

  • 50% Dividend Stocks
  • 50% REITs

I had to switch my dividend account from my bank (USAA) over to Vanguard, as the bank was shifting it to Schwab, and I really didn’t feel like having my investments split to a third bank. Luckily I was able to make that move at the end of May with no real effects. Overall the dividend account was up 1.3% on average, with stocks being the big drivers up and REITs sort of staying still. June will be dividend payout month, so I’ll get a better idea of overall quarterly performance then. I’m planning on some of these companies cutting dividends due to the economy.

My brokerage account at my bank was shut down (they were moving it to Schwab and I don’t want to have three large firms with our investments) so I shut it down and invested it all into Vanguard Value Index average fund, to try and chase some value stocks. It was up 5.1% in April, once the change was made.

My Vanguard value fund (where I’m keeping my “fun money” right now was up about 3% for May.

Overall, I was up 3.4% for May, though I am still down -8.03% for the year. I tracked it back, and my investments are back to where they were in early October 2019. Like many of you, I intend to “stay the course” rather than make any radical moves, though I am considering changing my allocation when I rebalance in early July. I think low interest rates will be killing bonds, and I’m not so sure about REITs in the post-Chinese Virus world. I’ll let you know my thoughts on that later.

Hope everyone is healthy and your June turns our well!

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Mr. 39 Months

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