If you read my post yesterday, I hope you could read between the lines my personal skepticism toward what “looks” like a V-shaped recovery on stock charts of major indices. I’m following up today because a reader of the post wrote an excellent comment to that post. Please take a look at his comment below yesterday’s post. See you next time.
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I didn’t realize you had a website until I was reading Chapter 10 of your book, so I subscribed!
I can’t wait to get started on mining for deep value stocks on my own. I subscribed to Financial Visualizations as well.
Take care, and I’ll be praying for you.
In Him,
Milt
Thanks for the note and for praying for me. May God bless you, dear friend.
Hey Paul,
It has been quite some time since our last correspondence. As you know, the stock market has recovered significantly over the past few months!
Recently, President Trump gave a phenomenal speech in Tulsa, Oklahoma. During this speech, he was optimistic about our economy and future market conditions.
We had a great bull market in 2017 after President Trump got elected. Before COVID, the stock market was at all-time highs under his leadership.
Assuming Trump gets re-elected in 2020 (which he probably will), it seems reasonable to expect similar future growth in the stock market. What are your thoughts on this?
-Ian
Ian, how are you? I hope well!
I’m optimistic so long as we continue to follow pro-business policies, especially toward small business. In my view, it would be very bad for the economy and stock market if we get an administration favorable of socialism, heavy-handed regulation and big government. That said, even with Trump’s pro-business approach, I’m a bit reserved to conclude just yet the net impact of our nation having shut down all economic activity for so long. We have 3 trillion of new money circulating which creates a lot of instant liquidity and short-term consumption (demand). The sustainability of V-shaped earnings growth is what I’m reserved toward offering a strong opinion. Now, if we are talking about the technology sector (and perhaps healthcare), I can see the case for bullish growth beyond the stimulus effect. The shut down seems to have changed the dynamics of doing business. Zoom meetings, for example, are more pervasive by the day in more and more arenas. Efficiencies from less travel, for instance will help the bottom line and may, in fact, add to productivity and thereby demand. We may see our macro economy take a different shape — something I feel I’m looking at through a pretty foggy lens at this moment.
A continuance of Trump policy could well lead to economic returns that parallel stock chart sentiment. Again, if so, I wouldn’t be surprised to see tech lead (as it is currently doing with NASDAQ setting new all-time records) as we might be undergoing a new type of tech revolution, deriving from being forced to do business differently with physical locales being made dormant.
I see a quagmire of factors. How to merge them all together into a cogent economic (and stock market) forecast is beyond my pay-grade. This new money circulating has significantly raised the national debt load. We assume the Fed can keep the interest rate near zero; yet never in history have we seen such accomplished in perpetuity. At some point inflation or deflation could creep into the picture even though we’ve come to believe the Fed can always “save the day.” Either deflation or inflation would bring about a new ball game. While we haven’t seen inflation in interest rates, we surely have witnessed incredible inflation in the money supply this century.
Actually, aside from our national debt, a continuance of current pro-business policy certainly makes me feel much better about sustaining a solid economy with good growth. That expanding debt load from a “ever-inflating” money supply, however, makes predicting much more tenuous in my view.