Skip to main content

Sound Advice: June 17, 2020

Rock and a Hard Place
Regardless of your age, impressions from childhood linger.  As the first days of summer approach, we all remember the feeling that accompanied the end of a school year.  Yet as much as many of us would like to believe we again have the summertime freedom to do as we wish, the reality is quite the opposite.
Although months of confinement and limitations on social interaction have increased our personal discomfort and severely impacted the business community, our current situation is not analogous to the end of any school year.  It’s quite the opposite.
There is every reason to continue wearing face masks, social distancing, and avoiding close contact with others.  Nothing suggests that we can modify our behavior significantly or resume patterns of daily living we enjoyed only a few months ago.
There are no meaningful advances in medical treatments.  At best, there are attempts to combine different approaches that might speed up recovery.  The hoped-for vaccines are still in early stages of development.  What we’ve accomplished so far is a flattening of the infection curve, essentially stretching the pandemic over a longer time to ensure availability of healthcare to those who become sick.  
Given this reality, we must wonder about people who are now gathering in large groups as if the storm has passed.  The rising rate of infection in places where constraints have been eased strongly suggests that we’re far from being out of danger.
At the same time, there has been grievous injury to business, especially among weaker companies. No doubt the big tech companies will grow even bigger.  They benefit from any shift away from one-on-one personal communication to impersonal digital interaction.  But consider the numerous mom-and-pop shops that will disappear and all the jobs that will go with them.
The freedom to open up may bring greater interaction, from both personal and business standpoints. If this were an ideal world and everyone carefully observed the discipline needed to open up properly, it might be successful.  But that’s hardly the case and we begin to see rising rates of infection in states that have relaxed restrictions.
As you might suspect, the investment markets are confused.  During what amounted to a lockdown from March thru this month, key statistics related to Covid fell steadily, indicating the effectiveness of the approach.  This led to an illusory feeling of confidence that the situation was under control. The temporary result was one of the strongest market recoveries in history.
Now, the markets are fluctuating widely again and probably will continue gyrating until there’s a substantial basis to believe real solutions are at hand.  The good news is that we’re getting closer to that day.  But it’s more than a few months away.

N. Russell Wayne, CFP®
nrwayne@soundasset.com

Comments

Post a Comment

Popular posts from this blog

Sound Advice: January 3, 2025

2025 Market Forecasts: Stupidity Taken To An Extreme   If you know anything about stock market performance, you can only gag at the nonsense “esteemed forecasters” are now putting forth about the prospective path of stocks in the year ahead.   Our cousins in the UK would call this rubbish.   I would not be as kind. Leading the Ship of Fools is the forecast from the Chief Investment Strategist at Oppenheimer who is looking for a year-end 2025 level for the Standard & Poor’s Index of 7,100, a whopping 21% increase from the most recent standing.   Indeed, most of these folks are looking for double-digit gains.   Only two expect stocks to weaken. In the last 30 years, the market has risen by more than 20% only 15 times.   The exceptional span during that time was 1996-1999, which accounted for four of those jumps.   What followed in 2000 through 2002 was the polar opposite: 2000:      -9.1% 2001:     -11.9% ...
Post a Comment
Read more

Sound Advice: January 15, 2025

Why investors shouldn't pay attention to Wall Street forecasts   Investors shouldn't pay attention to Wall Street forecasts for several compelling reasons: Poor accuracy Wall Street forecasts have a terrible track record of accuracy. Studies show that their predictions are often no better than random chance, with accuracy rates as low as 47%   Some prominent analysts even perform worse, with accuracy ratings as low as 35% Consistent overestimation Analysts consistently overestimate earnings growth, predicting 10-12%                 annual growth when the reality is closer to 6%.   This overoptimism can                 lead investors to make overly aggressive bets in the market. Inability to predict unpredictable events The stock market is influenced by numerous unpredictable factors, including geopolitical events, technological changes, and company-specific news.   Anal...
Post a Comment
Read more

Sound Advice: July 16, 2025

Fixed annuities are poor investments Fixed annuities are often criticized as poor investments for several reasons, despite their reputation for providing stable, predictable income.  Here are the key drawbacks and concerns:   High Fees and Commissions Internal Fees:  Fixed annuities can carry a range of fees, including administrative charges, mortality expense risk fees, and rider fees. These can add up to 2%–4% per year, significantly eroding returns over time. Commissions:  Sales agents and financial advisors often receive high commissions for selling annuities—sometimes as much as 5%–8% of the invested amount. This creates a financial incentive for advisers to recommend them, even when they may not be the best fit for the client. Comparison to Other Investments:  Mutual funds and ETFs typically have much lower fees and commissions, making them more cost-effective for long-term growth. Limited Growth a...
Post a Comment
Read more