The Economy is As Good as it Has Ever Been
These are great economic times. Some people compare them to the 1920’s. When I grew up, the roaring twenties were explained by the euphoria caused by the end of the World War. The people were happy and the boys were home and went to work. We had new technology, the cities grew. All of that was true, plus there was a pandemic. Perhaps the end of the Spanish Flu had a greater impact on the good feelings that lead to a great decade. Perhaps this was a greater effect than we remember. More on what we remember in a minute.
This economy is certainly the strongest of my career and lifetime. The numbers match 1957, when the boys came back from the Second World War and we had new technology, new jobs and most of us reading this Periscope were born. Interestingly enough, there was also a pandemic. The Asian Flu killed a greater percentage of the population than Covid 19 has killed. It would be less deadly than the Spanish Flu. Both of these pandemics afflicted the younger generations and, as we know too well, Covid kills those of us over age 65 at much higher rates than it does the young.
We Still Feel Scared
One insightful essay I read recently argues we are wimpy in comparison to our pandemic-surviving predecessors. As if that were news. There are good reasons to feel proud of our newly discovered sensitivity. No shame in our new awareness of BLM, Me Too, GLBQT, Asian and other minority issues. Although our competitors, mainly in China, portray these as weakness, I think America is leading the world. I don’t know how long it will be before the Chinese people come to a similar point in time where they, too, must deal with their biases. That time will come. Read further:
In the mean time, our equity portfolios benefit from a tailwind that history shows can last many years. Give your worries to your financial advisor. They are many, of course, and we are considering them, as a team. We are careful and prudent as we consider whether you and we should buy or sell this or that investment. Often, the most careful thought goes into the decision to simply hold—although you may not be able to see that work from the outside.
Reddit, Robinhood and Meme Traders Almost Have it Right
The following chart shows the futility of paying too much attention to the short-term news. From Athena Invest, this graph shows the odds of making money in equities over different periods of time. The recent news about meme investors using Reddit and Robinhood app is exiting and strange, but it shows that if they simply held their investment for a day, they would have a better chance than even to make money. But look what would happen if they did nothing but hold—the odds of making money increase.
Similarly, the charts for the economy are upward-trending and strong. Again, the strongest of my investment career and lifetime. The following chart, also from Athena, shows that patience with and ignorance of the short-term news drama will not hurt your investment performance. In fact, to the extent you can avoid acting on the noise you are likely to make even more money.
This is a refrain we have to repeat to ourselves, as your investment managers. We, too, are human. We are ready to explore the world again after Covid-19. We feel the same emotions and are prone to making the same emotional decisions as our clients. Fortunately, we are also a team with many years of diverse experience. We are invested the same as each other, and our clients.
We believe now is the time to be steadfast and confident. Set aside your worries about a market top or the eventual impending doom of another short-term market crash. Now it is time to get outside and enjoy this marvelous world we live in.