Fast and Furious Economic Cycles
It feels like ancient history, but the early 2020 economic meltdown that came and went is now in the 2021 economic recovery room healing from a difficult year. Little surprise that getting back to normal has required a lot of government intervention and cost. The fed has pumped trillions into the system to keep the gears moving. Since the shutdowns were government-mandated, the healing solutions have been government-resourced - all necessary to forego financial Armageddon.
Also not surprising: last year's shutdown caused a recession - a very short one. The U.S has had eighteen recessions in the last 100 years and the shutdown in 2020 was the catalyst for the shortest one in history: the pros that track such things suggest that the 2020 recession lasted only two months.(3) In contrast, the average recession over the last century has lasted 13.6 months(4) which makes last year's experience a true anomaly.
We also would argue that last year's 35% market decline, technically meeting the definition of a bear market (20% or greater decline), was not a true bear - perhaps a pseudo-bear. It came, it went, and then off to the races toward recovery. This remarkable (for many investors and investment professionals unexpected) rebound brought markets back to "normal," but, from our perspective, has overshot to the upside this year with too much enthusiasm...
Keep an Eye on the Horizon
Kudos to you if you have sold or are selling your home this year, but no net advantage if you have to turn around and buy...condolences to you if you are forced to buy in this market. If not, and you have not consumed cash too aggressively in this year's COVID cabin fever breakout, we would suggest keeping some gun powder dry for equity buying opportunities. We have noted several times this year that markets are cruising at expensive levels. Looking at some signs...our individual stock filters cannot find even a short list of undervalued securities, margin debt (borrowing to buy stocks) has yet again risen to record levels - $882 billion(5) - suggesting excessive speculation, and markets have not corrected since March 2020.
Markets will offer buying opportunities at some point. Get mentally prepared and have some cash available.