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The New and Improved Recession – Springer Financial Advisor Financial Advisor

The new and improved recession

The new and improved recession

– Written by Keith Springer

The media tell us that a meteor is hurtling towards Earth and is only seconds away from impact. However, when we look out the window, the sun is shining brightly and children are playing in the street. (Well, not in today’s smoky California, of course). The stock market is at record levels, the real estate market is on fire, and retail spending is accelerating. This is clearly not an ordinary recession. So what is there?

I’m going to get on my feet here and say the recession is over. There is no direct evidence yet, as both the beginning and the end of recessions are only proven in retrospect. I understand that we are in the early stages of a synchronized global recovery.

Retail sales rose 1.2% in July and excluding cars rose an even more robust 1.9%. This shows a literal V-shaped rebound since the March and April collapse with the same for existing home sales. Productivity reached its highest level in eleven years in the second quarter, and the Atlanta Federal Reserve posted 26.2% GDP growth in the third quarter, an estimate up 5.7 percentage points last week.

The Covid-19 pandemic era sets new rules for an economic downturn and gives us the new and improved recession. I fully understand that unemployment is above 10% and that daily life has been disrupted to an unprecedented degree as restaurants and shops are destroyed. However, I said before that this pandemic recession simply accelerated us to the new gig economy that would have gradually happened on its own over the next 5 to 10 years.

“The biggest difference will be that I can’t think of any other recession that essentially leads from a depression-like environment to a war boom in two quarters,” says Jim Paulsen, Chief Investment Strategist at the Leuthold Group. “The political officials reacted massively immediately and still are. They wouldn’t have done that in a normal recession, but they did this here because we immediately had a recession shape, which has never happened before. “

The early stages of recovery are always very restless. The market is rising despite most people not believing that it can, should, or could climb that proverbial wall of worry. If I’m right here, we’re in a similar place to 2009, when the economy and the stock market were only just beginning to rise when we emerged from the great recession.

It will not be easy. Certainly don’t be surprised if we soon get a brief correction somewhere in the 3-7% range. That may sound small, but that’s still 2000 Dow points so it’s going to be painful. On the whole, you should expect very volatile movements in either direction, as well as the occasional media-driven emotional roller coaster ride, but in the end, patient long-term investors will be well rewarded.

“Invest for need, not for greed!”

Cheers Keith

916-925-8900

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