The Tokyo Olympics was originally scheduled to start last week. Months ago, they postponed it until next summer. Now there is talk that it might be cancelled altogether. There is a realistic possibility that life won’t be back to normal next summer. First, that’s a real bummer. Second, why are stocks doing so well? Many companies are barely hanging on today. Can they do that for another year?
I have a few thoughts on the big stock market recovery, in no particular order:
- Stocks are forward looking. As people look out a few years, we can see a world where businesses are back to normal. We invest for the long-term.
- Governments around the world and central banks have enacted massive stimulus efforts to keep business and economy alive. Don’t fight the Fed.
- TINA – There Is No Alternative. The Fed has pushed interest rates near zero. Bonds and cash will not deliver any meaningful returns. Dividends on stocks are higher than the interest rate on high quality bonds today, plus you should get appreciation over time. If you can handle the volatility, stocks seem to be the place to be (This is not investment advice).
Don’t count on a stock market drop just because we continue to see bad news in the economy. That drop may never come. Stocks are surprisingly resilient, just like people have been through this pandemic. Stay safe and healthy. We’ll get through this.
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