Market Update May 8, 2020 – Opportunity in Tech

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Stocks finished higher for the week led by energy, tech, and consumer discretionary. However, stocks have largely been in a holding pattern since mid-April, when first-quarter earnings reports began coming out.

The April employment report showed that nonfarm payrolls fell by 20.5 million last month, erasing roughly all the jobs that the economy had added in this past decade’s expansion. The overall unemployment rate spiked to 14.7%, the highest on record since 1948.

U.S crude oil prices remained low, at less than $25 per barrel, but surged nearly 18% for the week, extending their recent comeback. Prices increased in the wake of recent production cuts and rising demand as some parts of the global economy previously shut down by COVID-19 began their reopening.

The S&P 500 has now recouped about half its losses from the record high earlier in the year, given optimism that the economy may have found its bottom and be starting its recovery as coronavirus-related restrictions ease and activity picks up as the states reopen.

Chart of the Week: Investors Seeking Opportunity in Tech

As Tech stocks turned higher for the year, the Nasdaq ETF that tracks the largest among them grew to a $100 B market value for the first time. The economic damage wrought by the coronavirus does not seem to be deterring investors from piling into tech companies, which appear attractive for their strong balance sheets and ability to create profits amid the work-from-home environment. Microsoft, Apple and Amazon are each worth more than $1 trillion.

Market volatility is likely to continue, so we believe maintaining a long-term perspective and avoiding emotionally-driven decisions remains crucial. Our experience through multiple market environments has taught us not to fear volatility and to invest with the long-term in mind. By keeping the number of holdings in the portfolio small, we strive to focus only on our best ideas. We seek to only buy stocks we would be comfortable holding for the long term, including the short-term setbacks like those we have experienced thus far in 2020. We believe remaining patient and disciplined can help our clients navigate the current crisis while generating alpha in the long run.