Some interesting trends going on - here’s my summary of many articles and trends I am seeing.
It’s the roaring twenties! Seriously, the economy is booming, and accelerating.
Yes, still issues with unemployment - though concentrated at the lower wage end and artificially caused by lockdowns. Various economic measurements coming in are consistently beating expectations. We all know that housing is doing well everywhere and the migration away from large cities into suburbs. But, did you know that housing starts and applications to build new homes are increasing at a strong pace?
Inflation is still a concern - and the market dropped a bit last week because interest rates ticked up. But it was just a tiny bit and when the rates stopped going up today, the market went up today strongly recouping some perhaps most of last week’s drop.
A lot of the numbers reported to us have underlying aspects that you need to know to understand. For example, unemployment numbers before and after the Christmas season are “seasonally adjusted” to account for temporary holiday hiring and then later firing. Well, this year due to the pandemic, these seasonal adjustments were probably not needed and made the numbers hard to interpret. Though the numbers are certainly a long way from where we want them, the seasonal adjustments made them look worse or at least skewed them from reality.
Meanwhile there is a giant bill trying to get through Washington that is labeled Covid relief. We all know that a typical Washington approach is to add on pet projects to a bill. This bill is more about adding a little Covid relief to a bill that is mainly Pet Projects. Given our mostly hot economy, do we really need more stimulus?
The health aspects of Covid are scary. That said, reopening the economy substantially if not completely would be plenty of “stimulus” right there.
After this bill, they’re talking about an infrastructure bill - that might contain worthwhile projects but also might be throwing gas on an already hot economy unnecessarily. And, as always, likely to have many pet projects too. :)
We’re sharing these insights to inform you, not because we’re going to make investing moves based on what we think might happen, bills that might pass, etc. To satisfy your curiosity more than anything else.
A reminder.: The only way to get the long term return of the market is to stay in the market despite the many twists and turns. Though we know the market goes up long term - the overall market patterns and patterns within asset classes/components are impossible to predict. So own it all, and rebalance as needed to get a little extra return and manage risk. We also need to remind ourselves that uncomfortable down markets and heart pounding, exciting, up markets - and boring flat markets - is each a normal, expected market behavior. Especially during the down markets, it can be hard to maintain our perspective because the doom and gloom is overpowering. Know that we’re always here to look at what is happening in the market and economy with you objectively.