The stock market rallied for a second straight month as the S&P 500 was up about 5% for May as many states began the process of “re-opening” the economy. (YCharts)  The rally in stocks came as investors tried to balance both good and bad news.  Good news came in the form of potential progress on a COVID-19 vaccine and therapies to treat the virus, monetary and fiscal stimulus around the globe, and anticipation of increased economic activity.  The bad news came in the form of very challenging economic data which included ongoing jobless claims, a contracting economy, and an official unemployment rate of 14.7%. (YCharts)

We continue to be positioned cautiously within portfolios as we weigh the impact of both good and bad news.  Our economic dashboard continues to flash warning signs which we believe are reflective of an ongoing recessionary environment justifying reduced risk for the time being.  We continue to watch closely the following risks which we believe have the potential to lead to future volatility:

• US-China tensions – tensions between the US and China ratcheted up once again as the two nations traded barbs over trade, the pandemic, human rights violations, and Hong Kong.
• 2^nd Wave – many leading health experts have warned of the risks of a 2^nd wave of the coronavirus.  The economic impact of a 2^nd wave could also be significant.
• Election Year – We are now within 6 months of the presidential election and polls show a potentially close election which may contribute to more uncertainty

As we outlined last month, we continue to see a few potential paths forward and have a game-plan in place for each:

• The first path would be driven by a medical breakthrough and would potentially allow the economy to re-open quickly without fear of infection.   While this type of breakthrough doesn’t seem imminent it would likely make us more optimistic.
• The second path would be one with no immediate medical solution.  We believe this scenario has the potential to prolong the economic downturn and warrants reduced risk levels within portfolios. 
• A third path would potentially come with a successful re-opening of the economy over the next few months (with no major health set-backs) and could lead to fundamental improvement in the economy.  We will be watching the economic data closely to gauge the pace and path of the economic recovery under this scenario.

Each of these scenarios could warrant additional changes to portfolios.  We stand ready to make those changes as needed and will continue to communicate our outlook as economic and stock market conditions evolve.

We hope you and your families are staying safe and keeping healthy.

Sincerely,
 

Your Team at TLWM

*Investment advice offered through TLWM, LLC., a registered investment advisor.

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index.

* The Standard & Poor’s 500 (S&P 500) is an unmanaged index. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment.

* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.

* Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

* Past performance does not guarantee future results. Investing involves risk, including loss of principal.

* You cannot invest directly in an index.

* Consult your financial professional before making any investment decision.

* Stock investing involves risk including loss of principal.

* This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Texas Legacy Wealth Management and its representatives are properly licensed or exempt from licensure.

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