Another Week of the Unthinkable

April 19, 2020

by Tommy Williams

To quote those titans of social philosophy, Sonny and Cher, it appears that “the beat goes on.” Another week of sheltering in place and it seems to be going on and on. With no definite end in sight. A storm brews between the Federal government and Governors of the states about how to restart the economy and one can only guess what our world will look like on the other side of this pandemic.

Not surprisingly, there are some very interesting reactions to this unprecedented calamity. For example, Gallup did a poll of a large group now forced to work from their homes.  Three out of five stated they would prefer to continue to work from home when the pandemic subsides, while the other two out of five would choose to work in a traditional office environment away from home. With technology in this Information Age many occupations can perform their necessary tasks remotely. Time will tell what the value of those informal exchanges at the coffee pot in the office actually was. Personally, I think the nature of relationships formed in the same proximity on a daily basis is very valuable. But that’s just me. I’m one of the two out of five. My friend, Robert Hall, author of This Land of Strangersand former global CEO famously states “the number one asset in any company is its relationships”. I think he is right.

Meanwhile, back on planet earth, it is good to see the recent rebound in the markets – and in our investment accounts. Regretfully, the biggest recent bounce happened in early April – not in time to be reflected on March 31st statements. Of course, March 31st was the end of the month and the first quarter. Your account is likely in far better shape than the statement you just received would reflect. 

I continue to be on the watch for observations about how people and markets are reacting during this time. An understanding of what the herd of people will do can provide clues as to what you should do – or more likely, what you shouldn’t do. A curiosity I’ve heard expressed is how can the market have a positive rally when the primary COVID-19 markers (confirmed cases/deaths) are still rising? Well, the markets are a forward-looking phenomenon. Financial markets are “looking through” the current events in a never-ending attempt to assess the future. 

Many factors affect U.S. stock market performance, including company fundamentals (how companies perform), investor sentiment (what investors think), consumer sentiment (what consumers think), monetary policy (what the Federal Reserve does), and fiscal policy (what the federal government does). The driver supporting positive stock market performance recently was Federal Reserve monetary policy. Axioms explained:

“The Federal Reserve announced Thursday it will support the coronavirus-hit economy with up to $2.3 trillion in loans to businesses, state and city governments…The slew of new Fed programs comes as economic conditions deteriorate at an unprecedented pace…and another 6.6 million Americans filed for unemployment benefits this week.”

I’ve also learned a new term, “revenge buying”. That refers to a huge surge in consumerism – people buying all kinds of stuff – when they are released from bondage and can get out and shop. This is likely to happen and will be a boost to the economy on the other side of this thing. Though I know Amazon, Fed Ex and UPS are very busy serving home bound online shoppers. I predict a tsunami of buying when everyone is released to newly reopened stores. There may also be a boom for those in the hair styling/cutting and weight reduction business! But not so fast. We proved an economy can be shut down quickly. The prevailing economic halt is unprecedented.  However, we should know that it cannot be re-started as quickly. That is likely a long drawn out process. When that fact truly occurs to us, we are very likely to experience market volatility in a negative way. So, if you think you’ve missed the bottom, and were wanting to buy good values at cheap prices it is likely that you’ll have another opportunity before it’s all over.

On a positive note, let me conclude by stating that most credible experts project that the markets will be higher at year end than current levels. Interestingly, it is our collective behavior – not some complex political, economic, or financial process/event that could provide this favorable conclusion to a year of extreme ups and downs.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Investing involves risk including loss of principal. 

Visit us at www.williamsfa.com. Tommy Williams is a CERTIFIED FINANCIAL PLANNER™ Professional with Williams Financial Advisors, LLC. Securities offered through Private Client Services, Member FINRA/SIPC. Advisory Services offered through RFG Advisory, a Registered Investment Advisor.  Williams Financial Advisors, LLC, and RFG Advisory are separate entities from Private Client Services. Branch office is located at 6425 You’re Drive, Suite 180, Shreveport, LA 71105.