2020 has been quite a year and the third quarter certainly did not disappoint! While we now have a much better understanding of COVID-19 and its impact on the economy, we are also on the eve of a pivotal election with daily new developments altering the narrative (the passing of Justice Ruth Bader Ginsburg, the President’s illness, the on and off again discussions around stimulus, to name a few). Although uncertainty is ever-present in investing, more time has brought more understanding, and as a result the investing landscape has become less murky than it was just a few months ago.
As governments injected stimulus into their economies and gradually reopened them, the global markets sharply rebounded from their lows. However, in September, we saw volatility return, primarily due to a pickup in COVID cases in Europe and a slowdown of economic gains in the US. The main culprit in the US has been a slowdown in job gains, with the economy so far only regaining about half of the jobs lost earlier this year and the unemployment rate remaining elevated at 8%, or over twice the rate pre-COVID. With consumer spending accounting for 70% of US GDP this jobs picture represents a hurdle for the economy to fully recover, as Americans simply have less to spend or become more frugal.
As we wrote in our July whitepaper, we have been active in recent months repositioning portfolios to succeed in the new, post-COVID world. In particular we have added companies well equipped to succeed an increasingly digital marketplace and less susceptible to shutdowns in the event the virus starts to spike again. We have taken advantage of lower prices to gain exposure to trends such as digital payments and cloud computing, which in our view are here to stay and only going to keep growing. We’ve also reassessed our existing holdings to ensure they have appropriate strategies in place to reach their customers in this rapidly changing competitive environment. And we’ve continued to upgrade our portfolio, placing a strong preference for best in class companies that are most likely to thrive and take away market share from less prepared competitors.
So while 2020 so far has given investors a lot to worry about it has also brought with it great opportunities, and in some ways actually made the forward-looking picture clearer than before. It has allowed us at Greenwood Gearhart to take advantage of attractive prices and reposition client portfolios for the future. We remain confident in our investing approach and believe we are well equipped to take on whatever the 4th quarter and beyond brings us.
As always, thank you for your continued trust and confidence in our firm. We wish you and your family the best and welcome any comments or questions you have.