On One Hand
First came the fastest bear market on record, due to a public health crisis and subsequent economic crisis. Next came the best 50 day rally of all-time. And of course, this rally made perfect sense in retrospect - the market is forward looking, big tech and 'stay at home' stocks are built for this environment, the Fed, pent-up demand for the economy re-opening etc. Please note my sarcasm.
Naturally, everyone wants to know what comes next.
On one hand, there are few attractive alternatives to stocks.
On the other hand, the market is still not considered to be cheap, even after the March crash.This is even more the case today.
One one hand, it's an election year.
On the other hand, we've had 58 previous U.S. presidential elections. The impact of election outcomes on stocks is largely overblown. Save yourself the aggravation and don't mix a portfolio with politics.
On one hand, COVID-19 isn't disappearing like a miracle. I know very few people itching to get on an airplane or return to the gym for the rest of this year. There could continue to be irreparable damage done to some parts of economy, especially small businesses.
On the other hand, there will be therapeutics and/or a vaccine to treat the virus. Demand should recover. Human nature doesn't change, and three years from now, the world will look largely like it did in January 2020.
On one hand, fiscal and monetary policy may have threaded the needle perfectly, creating the necessary bridge to get households and businesses back on their feet. In the eight weeks following the virus hit (from mid-March to mid-May) M1 money supply (consisting largely of checking/savings accounts) increased nearly 25%.
On the other hand, if we're dealing with a longer duration event, what happens when some of this stimulus runs out and the economy is only running at 70% capacity?
On one hand, unemployment reached its highest levels in the post-WW2 era.
On the other hand, many are seemingly better off collecting unemployment than going back to work.
On one hand, I love my children and it's been great being home more with them.
On the other hand, there are afternoons that I'm ready to go back to the office and am hopeful that schools can open in September :)
Your opinion on whether the market is going higher or lower undoubtedly has a very compelling counter argument. Be open-minded around both what's to come and how we collectively react to that reality.
You did not see the 35% decline.
— Morgan Housel (@morganhousel) June 3, 2020
Or the subsequent 40% rally.
But thank you for sharing your insight about where we're going next.
The content in this article was prepared by the article’s author. Voya Financial Advisors, Inc. does not endorse its content, and the views expressed may not necessarily reflect those held by Voya Financial Advisors, Inc.
