I’ve been holding a lot of phone meetings recently, and one question I’ve been asked in a variety of ways is, “How can the market be positive when over 30 million people are unemployed?” Let’s pretend we’re on the phone right now. Here’s how I’d answer that question:
Great question! I was just listening to Jim Cramer on CNBC and he responded to a similar question by saying the market “isn’t human.” While there may be elements of truth in that statement, that the market isn’t human, it’s actually far more complicated than that. COVID created a significant market pullback, the likes of which we haven’t really seen before. In fact, this market pullback was equivalent to the pullback we experienced in 2008 and 9/11 combined! Over the past month, we’ve been experiencing the rebound, and the market is prioritizing. It should make sense that while the United States is slowly reopening, the market should respond positively.
The question really begins when the nation is completely open again. What happens then? Does the market collectively say, “What’s next?” While we can look to the states that are further along in the opening process as a guide to show us what things will look like, we still aren’t sure what it will look like as a nation when we’re open. In states like Florida and Texas, it appears people are going to restaurants and they’re going to events with more than 10 people, but what about other states? Will people go to restaurants? Will they go to ball games? Will there even be ball games to go to?
These are all factors that will help determine what happens when we open. You have to believe that there will be some negative ramifications from so many people unemployed and the government borrowing upward of $3 trillion. It’s logical to assume that these realities will create problems for us in the future, but today, the market is simply responding to the continued opening of our society. Think of it this way: when you are on life support, you’re not concerned about your elbow hurting. You want to breathe again and have your heart beating again. Once those necessities are met, you can then focus on lower priority things, like your elbow hurting. Right now, our nation is coming off life support and the market is responding well. As the nation continues to reopen, the market will deal with these broader problems as they come in the future. All of this goes without even mentioning the 800-pound gorilla in the room, which is the 2020 presidential election.
Jason LaBarge, Financial Advisor and Managing Partner at Premier Planning Group
115 West Street, Suite 400 Annapolis, MD 21401 443-837-2520 www.jasonlabarge.com
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