MRM Commentary


Monthly Investment Commentary

June 2020

      Is the Rebound Running Out of Gas?

      After a historic drive higher from a late March low, the market sputtered last week, the first real sign of fatigue since stocks began their rebound. The market recorded its first three-day losing streak since February, including its worst daily drop in three months. Has the recovery run out of gas, or is this just a pit stop?

      MRM Group claims compliance with the Global Investment Performance Standards (GIPS®).
      Please contact MRM Group to obtain a Compliant Presentation and/or MRM's list of Composite descriptions.

      MRM Portfolio

      Markets came a long way in a short time, so the gains aren’t all gone
      Last Thursday’s 1,800-point drop in the Dow brought back memories of the dramatic swings that were prevalent through February and March. Although the market declined 5% last week, it should not be lost that it is still 36% higher since late March and just 10% from its all-time high. In contrast to the persistent February/March selloff, Thursday’s drop was followed by a gain, reflecting a better balance of optimism and caution. The market's recent strength also provides another reminder of the importance of staying invested.

      Infant recoveries often stumble, but this doesn’t spell disaster
      The early stages of bear market recoveries are more akin to a toddler learning to walk than an Olympic runner: Stumbles are inevitable. The current rebound has taken shape amid progress on the health care front, along with the market turning its sights toward the reopening of the economy. Both of those conditions are still viable. Last week’s commentary from the Federal Reserve around its outlook for a gradual economic rebound, along with news of an acceleration in new infections and hospitalizations in certain states, served to temper the market’s recent enthusiasm.

      We continue to believe the economic recovery will be durable
      But not without a few stumbles. Recent evidence supports our view that GDP will get a boost in the coming months as quarantine measures are relaxed and employment conditions heal from the initial shock of the shutdown. That said, we think the return to pre-virus economic output will be more gradual, due in part to some lasting scar tissue in the labor market. We also believe a vaccine will ultimately be necessary before consumer and business activity can fully return to (the new) normal. We think the path ahead will contain a combination of encouraging economic progress and periodic disappointments.

      MRM'S VIEW

      While market sentiment appeared to grow a bit too complacent in recent weeks, it’s the broader outlook that matters most for long-term investors. In this respect, we think optimism is appropriate. Although the pendulum of market sentiment and expectations will swing around the baseline, we think a gradual but sustainable economic expansion, persistently low interest rates and a rebound in corporate profits will serve as the most prominent.

      Source: EJones

      MRM model holdings as of March 31, 2020



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