New investors have taken the stock market back to February levels while everyone else is desperately searching for a vaccine. Thanks to the coronavirus, roughly 780,000 of bored people staying at home with nowhere to go, have created accounts at Charles Schwab, E-Trade, and Interactive Brokers. These newbies have charged into the market even as companies have begun to lower their revenue guidance. It is all but certain that the second quarter results from US corporations will look worse than the first. But, households in America are looking for something positive to latch onto – you can’t go swimming; you can’t go to restaurants; you can’t go to the movies; you can’t even have your friends and relatives over for a BBQ. What else is there? Buy the stocks of companies you love – Apple, Google, Amazon and other corona virus beneficiaries like Zoom are all benefiting from new money coming in. But, is this a house of cards or is it signalling a real recovery?
Future Wealth’s View
In times of difficulty, every human has an innate belief toward survival. That means looking for bright spots when everything else has been turned upside down. The stock market is structured such that when there are more buyers than sellers, it moves up and, likewise, it goes down when the opposite happens.
But, the stock market is not always a reflection of the economy and the reality on the ground for millions who are unemployed is pretty dismal. The Congressional Budget Office (CBO), just this week, announced that it could take the US economy most of the next decade to recover from the coronavirus pandemic. Which implies that it could take a decade for the labor market and household wealth to recover.
In the meantime, the stock market is saying “Corona virus was just a bad dream. Let us all wake up and get to work”. We, at Future Wealth, opine that the market has lost its mind. When things go south again, it will become apparent that no one has done their homework, and, of course, no one will apologize. It will be, up to each one of us to ensure that we do not get separated from our money, once again.