Guest News Brief by Kip Hansen — 1 December 2020
In March of this year, 2020, U.S. markets took a tremendous hit as confidence in the ecomomy was badly shaken by predictions of millions of U.S. deaths.
So, while it is true that stock markets took an initial heavy hit – all things in the stock markets are relative. Of course, there has been an “economic downturn” – the economy has been literally turned down by edict from national and state governments – millions have been put out of work as their employers have been ordered to stop doing business by the multitude of nations that have sacrificed their economies in the [misguided] belief that doing so will “save lives”.
But the predictions that the Worldwide Covid Lockdown would crash U.S. stock markets simply turned out not to be true.
Here is the data, from Yahoo Finance, as of the close of trading in New York on 1 December 2020.
[You can see the full sized, near-real-time originals from this page clicking on the three indexes at the top bring up individual pages with graphs. You can select “Max” for the time period to see the versions of the images used below – kh ]
As we can see in each chart that there was a shock response to ordered lockdowns visible in each of the four indexes – but these sharp drops only took markets back down to the levels seem in late 2017 or early 2018 – two years of unconstrained gains were temporarily lost. This most obvious on the chart of the Dow Jones.
As of close of markets today (1600 hrs EST) all four major U.S. stock indexes are at All Time Highs.
There has been no stockmarket crash in response to the pandemic – on the contrary, the four major U.S. markets are at their highest levels ever seen.
How can this be given that we know that the U.S. economy has taken a serious hit with lockdowns and business restrictions literally destroying some industries, such as the hospitality and travel sectors, and particluarly small and very small – Mom and Pop — businesses?
The simpliest explanation is that old saw: “The Markets are not the Economy.” And that is so true. But the markets do reflect the confidence that investors have in the future – and despite the pandemic and the disastrous misguided governmental responses to it, investor confidence is extremely high and their optimism is driving market indexes to new heights.
What does this mean for you and me? If you have a pension fund or personal well-diversified investments, you are doing very well as your pension fund prospers and your personal investments increase in value.
Not all stocks are winners under present circumstances. This chart is Carnival Cruise Lines – your investment in CCL has not done well, despite the gains of the general markets. Cruiseship lines have been slammed by the negative news surrounding the Diamond Princess debacle (and other Covid stricken cruiseliners) and have not recovered as yet.
Saavy investors spread their investments over a wide variety of industries and individual companies – following the mantra: “Diversify, Diversify, Diverify”. Thus their results mirror the major stock indexes. And they have been winning, and winning, and winning.
Do not listen to the Doomsayers! Despite our current troubles, the future is bright and everything will work out.
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Tell your kids . . . they are prone to listening to the wrong voices, the negative twittering mob. Assure them that it will all work out in the end. Honest.
Many of us “older citizens” have our life savings invested in various ways – some have pension funds, some have personal nest eggs – that depend on the health of the stock and bond markets. And we derive most of our annual income from these sources. If we have followed good investing advice – the basics of which have not changed in my lifetime — be it on our own or via our financal professionals – we have thankfully weathered the storm rather handily, despite ill-advised actions by our governments in response to the Covid pandemic.
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