The Big Disconnect Between
Markets and the Economy
Investors that missed the fastest market recovery in history are scratching their heads...
How can this be? So many scary headlines, so much financial devastation, yet markets have migrated from the fastest bear market in history to the fastest recovery - up 48% from March lows in a matter of months - and yet news is still bad and scary.
We noted in previous communications that market action in 2020 has mimicked past corrections even though the February/March downturn met the definition of a more severe bear market decline. Our early 2020 assessment of the declines suggesting that they were mimicking a correction proved accurate. Corrections most often rebound quickly, bear markets typically take more than a year to recover.
As we state in our recent mailer:
Why the market rebound? Investors forget that markets are forecasting barometers - they look ahead three to nine months out while individual investors only see today’s news. Individual investors fixate on politics and details in scary media news and latch onto pre-conceived notions of market-moving catalysts that ultimately do not move markets.
Here in 2020, m
arkets already know and have priced in the risks of a virus second wave, that this is an election year, that so many are unemployed. Millions of investors know and act on that well-known information and then markets price it in. This information is no longer market-moving.
And then we continue...
Of course, there will be another period of volatility this year – there is volatility every year. But stick to your well-designed investment plan and remember that really bad and currently unknown "new" news is the only force that will cause another bout of temporary declines. Everything else we know is already priced in.
And finally this:
This was a year that required the benefit of experienced advisors providing calm guidance and disciplined management.