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January 25, 2021 | Hey Snowflakes…

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

In researching the latest dance moves on TikTok (did you realize Michael Jackson is back?) over the weekend, a poignant vid popped up. A twentysomething girl stared into her iPhone and asked wrinklies, paleos and half-dead Boomers to share their stories about bygone hard times.

Things seem so scary and uncertain, she said. Was it ever this bad in the past?

It’s human nature to believe you live in a unique time and you’re special because of that. The economy seems broken and hopeless. Houses have never been more out of reach. The future’s clouded. Jobs are scarce. Politics is a mess. There’s a pandemic that won’t quit. So is this, like, the worst ever?

For you Millennials, it is. Bummer. You didn’t experience 22% mortgage rates, Khrushchev’s shoe-banging, the Cold War or Black Monday. Even Nine Eleven and Y2K are zeroes. But here’s the good news. This current mess will end. In fact, it’s already in sight – if you believe what the financial markets are telling us (instead of dumbass social media).

First, dear snowflakes, there’s a reason the chart of the S&P 500 (a broad measure of American companies) looks like this:

What is the stock market telling us?

 

 

That’s over one year. You can see where the virus whacked emotions on March and the subsequent recovery. Actually it’s been more like a rocket. Up 18% in a year’s time, while other indices have bene even more aroused (the Nasdaq is ahead over 40%).

So what? Markets have responded to tons of government stimulus spending as well as central banks keeping rates low and pumping buckets of cash into the system through bond purchases. That fiscal (government) and monetary (CB) stimulus just shows how the system isn’t going to let Covid win, or the future fizzle. So have faith. But there’s more – companies are making money again, so their shares are rising. Right now S&P corps are reporting earnings, which are running 23% above expectations. Tech companies are making money (BlackBerry and GameStop are the new darlings, and recently it was DoorDash and Airbnb IPOs) but so are the boring old ‘value’ companies that make cars and bum wad. The point is simple. Investors are pumped. You should be, too.

Ditto for the bond market, which is way more boring, but thirty times bigger. This is where debt is traded, and it’s been impacted by low interest rates, low inflation, low growth, central bank policy and, yes, too much virus. So yields on bonds have beewn in the ditch, which has also brought mortgages down and sent house prices up. But things are on the move here, too. Look at this chart of where investors see rates headed over the next five years.

 

Why? The market thinks the virus will be clipped, the economy grow rapidly in the third quarter and inflation return. Investors therefore demand a premium on bond yields (which lower bond prices) for protection. There’s no doubt, they add, the cost of money will go up as the public heath crisis fades. So the prime at the big banks may increase for the first time this summer, commencing a slow but steady ascent.

For the young, it’s good news on several fronts. More jobs and expanding opportunity as the economy reflates. Lots more hiring. More ancient, old GenXers deciding to stay as WFHers after Covid passes, opening up positions for those who understand employers want to see, touch and breath on their employees. And, of course, higher mortgage rates to halt the real estate escalation.

What? You need more?

Okay, vaccines. There are three of them in place or coming. A couple more will be added in 2021. Yes, the government has been incompetent and deceiving during the vax roll-out, but that will end. Meanwhile surveys (even on this pathetic blog) show a big majority of people are anxious to be jabbed and herd immunity will therefore be a reality.

When? The feds say by the end of September. But well before that, lockdowns, quarantines, self-isolations and restrictions will end as new infection levels decrease (happening now). That will hasten the economic reopening which equity and bond markets have been signaling.

More? Still not convinced?

Okay, there’s Biden. First, that dogawful US presidential election is over. The Proud Boys have denounced Trump, even. The Capital insurrection and riot was the last nail in the coffin of the redneck right. The 45th president lost his creds, any respect that remained, his public voice plus his sponsors and his brand. A huge disruptive force is gone. And in its place, a career administrator is running the world’s biggest economy. His first job is to vax 100 million people in 100 days, knowing there is no other way out of the quagmire. What a contrast.

Markets liked Trump’s deregulation, expansion, low-tax and growth agenda. They like Biden even more. He’s an adult.

Conclusion, moisters?

Yeah, things suck. But there’s never been a pandemic that lasted. They’re always temporary. Nor have we ever come out of an economic crisis without a surge in growth, which usually means more jobs, inflation, better wages and opportunity. It’s coming. Soon. Chill.

Now get over here and show me how to moonwalk.

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January 25th, 2021

Posted In: The Greater Fool

One Comment

  • walter chapman t says:

    BIDEN IS A CRIMINAL AND YOU SHOULD KNOW BETTER. THE CAPITAL INSURRECTION….. SEE RUDY GIULIANI – WHAT REALLY HAPPENED ON JANUARY 6 TH- YOU TUBE. PLEASE DIGEST THE WHOLE STORY AND REPORT IT AS SUCH. REMEMBER 90 % OF THE MAIN STREET MEDIA ARE SOCIALIST AND THAT COMES OUT IN THEIR NARRATIVE. NOT HELPING ANYONE BUT THEMSELVES. TIME TO FEED THE PUBLIC THE TRUTH AND STOP THEIR LEFT WING BIASED… AFTER 40 YEARS OF THIS , WE ALL BETTER WAKE UP…..

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