Market Pulse: On the other hand
“Give me a one-armed economist,” so said Harry Truman who was frustrated by his economic advisers who said one thing then “on the other hand” followed with a different take. Frustrating indeed.
I see economists and strategists on CNBC and Fox Business day after day. They all have two hands. Some say that stocks are expensive by traditional measures, but add that on the other hand so are bonds. If the economy expands and profits grow stocks will do well. On the other hand, if the economy slows and profits stagnate stocks will not do well. Harry had a point.
When it comes to the economy there are usually two sides to every issue and sometimes things are not quite black and white. Some are grey. The economic recovery is a good example.
We will soon hear that third-quarter GDP growth was at a record as were job gains by a huge amount. The fourth quarter will be good as well, but not as strong as the third. The housing market has been the economy’s strongest sector with new starts and construction accelerating. Consumer sentiment is rising, factory orders as well.
At the same time the unemployment rate is a sky-high 8%. Four million U.S. workers who can’t do their jobs from home are leaving the workforce in order to help their kids with distance learning. Last month about 20 million people were unable to work because their employer closed or lost business due to the pandemic. The result of the pandemic is a “haves and have-nots” economy. The economic recovery is “K” shaped.
The stock market has given just a little ground after setting records over the summer. Not even President Trump’s virus news could set it back. In knee-jerk fashion stock futures fell 500 points overnight on the news only to recover during the day and rise further from there.
Still, investors have been focused mostly on negotiations for another stimulus package. News about progress or lack of it has driven stocks for weeks and it is driving them again as I type. If relief (even partial) is nailed down, the market will respond. On the other hand (oops!), if there is no relief prices could briefly head south.
As always, if you have a long-term time horizon and aren’t emotional about short-term swings, then investing is easy. Why? Because over the long run stocks go up. There is no “on the other hand” about that.
David Vomund is an Incline Village-based Independent Investment Adviser. Information is found at http://www.VomundInvestments.com or by calling 775-832-8555. Clients hold the positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.
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