We’re halfway through another week of lockdowns and quarantines, and it seems some portion of the population is entertaining themselves by buying stocks. The optimism in the stock market over the last three weeks leaves many of us scratching our heads. No matter the news (today we learned that the U.S. economy shrank by an annualized 4.8% in the first quarter), the bulls bravely march on, driving the S&P 500 up, up, up… and, potentially, toward the edge of a cliff.
Most analysts (myself included) don’t see this rally continuing, and some expect the market to even test the lows hit in March. Though it can be tempting to chase a rally like this, the potential downside is currently larger than a conservative investor could probably stomach. If (when) the sell-off does come, there may be some buying opportunities for those willing to take on a bit more risk in a portion of their portfolios. As a reminder, your Cooper Capital account is a full brokerage account. We have the ability to supplement your bond portfolio with stocks, exchange-traded funds, and mutual funds. If you’d like to discuss the potential for purchasing equities during the next downturn, we would love to hear from you.
In the meantime, principal and interest payments continue as scheduled on our mortgage-backed bonds. Prepayment speeds jumped in March with lower mortgage rates. We expect the speeds to remain elevated for a short time, then to decrease as the economic effects of the coronavirus hit the housing market.
This information is not intended to be used as the only basis for investment decisions, nor should it be construed as advice designed to meet your particular needs. You are advised to seek the advice of your financial adviser, legal or tax professional, prior to making any investment decision based on any specific information contained herein. Copyright Cooper Capital, Inc. 2020
