Alphabets of Recovery

Alphabets of Recovery

  • We had a V-shaped bounce after a sudden and steep fall, but the V-shaped bounce has not yet returned the U.S. or global economy back to pre-COVID-19 “normal” economic activities.
  • We are also experiencing a K-shaped recovery where the financial market has rewarded the companies that thrived based on technology while companies that rely on human contact continue to struggle. This is evidenced by the increasing wealth and income divide for workers and families in the two different economies.
  • We now are in the “square root” portion of the recovery where the initial V- shaped bounce has slowed and the trajectory of climbing back to normal has somewhat flattened.
  • Depending on the scope and scale of the expected COVID-19 resurgence during this fall/winter flu season and the federal and state government responses, we could enter a W- shaped recovery where the economy retreats before furthering its normalization.

Too often investors get caught up with short-term events and noise and are unable to see through near-term uncertainties and focus on the future.  The question we pose ourselves is do we believe the market will be better 6-months from today.  If the answer is yes, then stay the course and overlook any short-term volatility that may come our way. 

We believe that under either another Trump or a new Biden Administration, Congress will approve a new sizable stimulus package.  Under Biden, the package is likely to be bigger.  Companies, large or small, want certainty so that decisions can be made to move forward from hiring to investment.  We are hopeful that, regardless of who will occupy the White House, COVID-19 will be more under control with a viable vaccine available next year, but we are not out of woods yet. We may still have a W-shaped recovery depending on how we all handle COVID-19 before the vaccine. 

For now, buckle up.  The complete quarterly commentary from Experiential Wealth can be found here.

Related: The Fed is Codifying Lower for Much, Much Longer