Don’t be Fooled by the S&P 500

• 2 min read

Finger turning wooden die that spell S-&-P with green up arrow or red down arrow.
Though the S&P 500 is doing well, both opportunities and risks in investments abound.

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Finger turning wooden die that spell S-&-P with green up arrow or red down arrow.

QUESTION:

Markets seem to have bounced back, and I don’t want to miss out, so when can I get back in the stock market?

ANSWER:

Don’t be fooled by the S&P 500 into thinking that the market is back and all is well with stocks. Yes, the index is actually up on a 12-month basis, but the S&P is not the market. Technology and healthcare stocks dominate the S&P, and those equities have seen a surge in business due to the pandemic.

You see a very different picture if you broaden your view and look at value stocks, small- and mid-cap stocks, and foreign equities. These stocks are still significantly off their highs, leaving plenty of opportunity for investment. But it will take conviction and courage to stay in these investments. The recession fallout is not over, and these assets will remain volatile until the economic path becomes clear.

A note of caution: AMG is optimistic about both the economic recovery and the market potential going forward. However, significant risks still exist. It’s possible vaccine development proves slower than expected, the second wave of COVID-19 infections is larger than anticipated, or a whole host of social and political pitfalls occur. So while it might seem like a good time to start investing, clients should work with their advisors to ensure they have enough cash and cash flow in case the unplanned happens.

This information is for general information use only. It is not tailored to any specific situation, is not intended to be investment, tax, financial, legal, or other advice and should not be relied on as such. AMG’s opinions are subject to change without notice, and this report may not be updated to reflect changes in opinion. Forecasts, estimates, and certain other information contained herein are based on proprietary research and should not be considered investment advice or a recommendation to buy, sell or hold any particular security, strategy, or investment product.

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