Spring 2021 Update

Joe Pitzl |

I came across this photo the other day on social media and got a great laugh out of it.

I also found it to be a great way to highlight the complex relationship between facts and data. Using the data we know, this statement is indeed, a fact. However, it is obvious that this is a useless fact. It is not always that simple.

It goes without saying that the past 12-14 months have been challenging. About a year ago, the word “unprecedented” became an everyday term.

In addition to unprecedented, “pivot” became a daily phrase, as we were all required to pivot to working-from-home, pivot to remote learning for our children, pivot to not seeing our friends and family on a regular basis. We cancelled vacations, graduations, youth sports and camps. None of us had ever experienced anything like it.

Nor have we experienced anything like the unfathomably large stimulus packages and Fed programs throughout last year and into the first part of the current year. Many investors continue to be astonished – upset even – that markets continue to advance and are certain that they must fall sharply back to match “reality.”

Last March, we quoted the outstanding financial journalist, Morgan Housel, who simply wrote (1) market crashes always go too far, and (2) markets always rebound before the economy.

Shortly thereafter in a separate blog about the “disconnect” between the markets and the economy, we discussed the massive numbers involved in these programs, citing a prominent hedge fund manager, “you are replacing about $3.7 trillion of lost economic output with $12.7 trillion coming from the Federal government. I like my chances in that market.”

In other words, yes, the world shut down and did not have a clear path back to normalcy, but if we look beyond the surface, we just threw about 3x the resources needed to replace that lost output. If we keep spraying money around, it has to end up somewhere…and one way or another, it ends up flowing through companies trading on the market.

As is the case with just about everything in life, the facts we are presented on the surface rarely tell the whole story. We are best served to take facts and data presented to us and try to think 2 and 3 layers beyond the obvious.

In standard fashion, after winning the election last November, the Biden Administration has promised many things, among them a commitment to cleaner energy and cracking down on Wall Street.

So just as everyone predicted, by far and away the best performing market sectors since then are…big oil and financials!

We have been receiving many questions about when the other shoe is going to drop. As always, we really don’t know. Statistically speaking, we should expect a 10% - 15% correction every 11-12 months. Someday it will happen, but then it will inevitably recover. But as long as the Federal government continues to spend and support the economy as they have been, a full-blown crash seems unlikely.

We will be paying close attention to inflation and taxes throughout the year. As for you, we hope you are able to reconnect with friends and family as things reopen over the summer. We look froward to seeing you soon!