May the 4th be... oh, never mind*
Remember early March? It was a vacuum of information. Can we trust the reported Covid numbers? If my dad has to go to the hospital, will I be allowed to visit him? This is America - how come we don’t have all the masks and ventilators we need? The streets were emptying, toilet paper was nowhere to be found, and the headlines read, “the worst ____ since ____.” Investors, unable to get answers, sold stocks and bought bonds. Today, we’ve adapted a little bit, which is a step forward. We can all rattle off at least one or two recent Covid data points when talking with friends, from six feet away. Some of what we’re learning is constructive: our firsthand experience and that of watching other countries how best to treat it. We’re seeing what works when trying to intervene economically with those whose livelihoods have been affected. Some takeaways is negative: we’re seeing how hard it is to keep hundreds of millions of people at home for 6 weeks. Conferencing via Zoom was fun at first, but now we’re a little burned out. Even with more information today than two months ago, it would be a guess to tell you where I think the world will be in early July. You can argue - and I will listen, and in many cases, agree - that the government’s fiscal and monetary stimulus is ham-handed or too little or too late. Maybe you think it’s been perfect. I would highlight that, in the past, betting against our government’s efforts to re-ignite the economy has been a bad bet. You can say “it’s different this time!” It’s healthcare (not real estate/tech/war); we can’t borrow this much; we might get sick a 2nd time; rates are already so low. To which I would say: we always recover and grow beyond. I know jobs will likely take years to recover what we’ve just lost. Lots of elements of everyday life will be slow to come back; but, they will move forward. Thanks to innovation, there is always a “new normal.” Plows, cars, planes, semiconductors - all were new normals. Is the stock market ahead of itself? Will it go down? Will it hit a new high? Yes. Are we borrowing more than ever and allowing corporate stock buybacks and artificially propping things up that maybe the free market would better sort out? You bet. My last point, for now: markets are functioning and the price level of the S&P doesn’t take sides. The optimism of early May has supplanted the vacuum of early March, and is becoming self-fulfilling. Remember - I’m not saying you should go out and spend, or stay in and save - I’m saying that as the economic conditions improve, consumer confidence will (I’m not going to write “green shoots!”) help support itself in the coming months.
* May 4th is "Star Wars" Day, because May the 4th be with you, yadda yadda