During this stressful time, we know that your health and safety, and the wellbeing of your family and friends, is your number one priority. Like all previous crises, we will recover a stronger nation. However, as the coronavirus (COVID-19) pandemic accelerates domestically and the U.S. economy, the strongest and largest on earth, has come to a grinding halt, many of our fellow citizens are significantly impacted. We are almost certainly in a recession, but the government response is of a size and scale that has never been seen before, even during the 2008 financial crisis. I am confident that the economy will endure and a three- to six-month bottoming process for stocks and corporate bonds has likely begun.
Third quarter stock market performance was modestly positive. The S&P 500® Index and the Dow Jones Industrial Average both advanced by 1.2%. But that small gain was erased in the first week of October, as worries over trade, manufacturing, and politics took center stage. Still, the U.S. stock market’s year-to-date advance has been impressive; through September 30, the S&P 500® returned 20.6%, its best nine-month run of any year this decade.
The first quarter’s equity markets rebound continued into June after a weak final period of 2018. The S&P 500® Index rose by nearly 4% in the second quarter, bringing the Index’s year-to-date 2019 return to +17%, its best first half performance in 22 years.
As investors search for solutions to help meet their risk and return objectives in these uncertain times, Palisade believes concentrated equity portfolios of high-quality issuers offer a compelling approach to achieve long-term investment objectives. Investors should not underestimate the role of individual companies within a portfolio or believe all risk can be avoided through diversification. Instead, investors seeking long-term return should consider allocating some portion of their assets to concentrated strategies that allow individual companies to drive portfolio performance.