The summer brought an economicrebound and a continuation of the stock market rally that began in spring. Inlate September, the Federal Reserve Bank of Atlanta's GDPNow tracker estimatedreal Gross Domestic Product (GDP) growth of 32.0% for the third quarter. Allthree of the major Wall Street benchmarks advanced in Q3; the S&P 500 addednearly 8%, ending the quarter up about 4% for the year. Even so, U.S. equitiesslumped in September as traders worried that the stock market might be gettingahead of the economy.

When the stock market rallied back in the beginning of March, it seemed the market was anticipating a V shaped recovery. Six months later, some of the optimism seems justified.  The economic recovery has shown surprising resilience in the face of increasing levels of coronavirus infections and expiring fiscal stimulus.

TheAmerican mathematician Claude Shannon famously established a lower bound forthe number of possible moves in a typical chess match: around 10120. That’s 10with 119 zeroes after it. Reflecting on when the COVID-19 crisis began tounfold across the globe, I think the Shannon number adequately captures thebreadth of possible economic outcomes at the time.

Stocks advanced relentlessly last week on positive COVID-19 developments, encouraging economic data, and a supportive policy shift in the Fed’s approach to its target inflation rate.  The Dow Jones Industrial Average increased by 2.59%, while the Standard & Poor’s 500 jumped 3.26%. The Nasdaq Composite index leaped 3.39% for the week. The MSCI EAFE index, which tracks developed overseas stock markets, rose 1.19%. 

Stock prices rallied in July as further development of a COVID-19 vaccine and better-than-expected corporate financial reports encouraged investors.

Stocks were mixed last week as investors reacted to positive economic data, progress on a COVID-19 vaccine, and the continued nationwide increase of COVID-19 cases.

The recent market declines triggered by the COVID-19 pandemic raise important questions for those in or near retirement. When you add in historically low yields on fixed income investments and an uncertain economic future, questions arise about how retirees will weather the storm. Among other things, some may be questioning whether the 4% rule on investment withdrawals remains viable.