- A forecaster's nightmare: with no shortage of obstacles, misdirection and confusion, we dive deep in order to form a reasonable capital markets outlook
- Context is key; the economic pendulum has swung from one extreme to the other, and appears to be swinging back again
- The monetary and fiscal responses were the “triage needed to save the (economic) patient” but partial reopening is preventing the patient from fully healing
- The Fed’s biggest move since the “Volker Shock”, what will be the FAIT of inflation?
- Investors must plan for self-sustaining portfolios and not depend on Federal Bailouts
This is a forecaster's nightmare. There is no shortage of obstacles, zigs and zags, misdirection and plain old confusion that must be overcome to form a reasonable capital markets forecast over the next ten weeks. OK, now the difficult becomes impossible… or does it? We will investigate this and more in order to see through to the end of the year, but keep in mind, it is the “fundamentals that drive markets”.
Context is always important, but this is especially true when the pendulum swings from one extreme to the other. At the beginning of 2020 the United States’ longest expansion in recorded history was still, by and large, chugging along: unemployment was hovering around 50-year lows, real wage gains were accelerating in lower paying jobs, and the benefits of growth were being more widely shared. However, there were some signs that raised concern, such as manufacturing and corporate earnings growth turning negative, but by-and-large few foresaw the cataclysmic Bear Market on the horizon.
Then the pandemic reared its ugly head in mid-February and global economies shutdown like dominoes. Real GDP in the United States fell 31% in the second quarter; payrolls were slashed by 22 million; and Great Depression-like drive-up food lines were evident – scary indeed.