July 21, 2020
My Dear Reader,
While Nashville remains in phase 2 and California refuses to open, I believe that we can safely assume that governors across the board are working under the belief that they can lock down the economy indefinitely and that the economy will always recover. Unfortunately, I believe that we are far past that point. I can recall many articles in April and May, from respected financial experts, that claimed that we could not last much longer than mid-May or early June. While we have passed that point, it is only due to the Feds additional rate cuts and stimulus plans. Even though these economic plans can soften the immediate impact of an economic recession, they cannot be a long term strategy. Certainly, they cannot replace a total shutdown of quarters 2 and 3.
The impact of these lockdowns has certainly had an impact on American business both large and small if the recent bankruptcies are anything to go by. JCrew, Hertz, 24Hr Fitness, JCPenny, Pier One Imports, and now New York and Co. are all headliners as the COVID casualties have continued to mount. But the question that matters is: how does this affect you and the economy now and in the future?
As for the economy, I believe we are seeing irreparable damage done to both confidences in the stock market and in traditionally safe investments. Anecdotally, I have seen more and more social media posts that decry the Trump economic boom of the late 2010s as being a boom “for the rich” due in large part to the stock market rise and subsequent downfall of many companies. And while these thoughts are certainly not those of experts, it’s important to know that the feeling of laymen determines the spirit of the age. If the people believe that the market and the economy is mostly smoke and mirrors, and who could blame them at this point, that will define both investor behavior and interaction, at least in terms of mutual funds and 401k fund managers.
In addition to a loss of confidence in the market, there will have to be an almost paradoxical forced reliance on the market and market risk as traditionally safe investments and diversification becomes more aggressive. This is due to market factors such as an increase in life expectancy and market factors such as inflation and bond rate cuts that have come along with the increase in federal relief packages. I bring all of this to your attention because I am not a statesman. It is not my job to balance the opinion of medical science with economic data and public opinion before making a judgment, but it seems rather obvious to me that we are out of time. And the belief that each and every one of these governors seem to have with regards to the workings of the economy and its temporary effects, will cause more damage to the financial stability of the United States and her people than the virus ever would have. I would argue that many governors seem callus to that fact, that they see your economic future as expendable if it makes them look like a hero. And that is truly terrifying.
To Your Creation and Potential,