The Other Side of Bad Is Good… for Stocks
If you’re worried about negative news stories tanking the stock market, you’ve got a lot of company.
Investors are worried about what virus spikes and more shutdowns, if not lockdowns, will do to stocks.
They’re worried that companies laying off workers by the thousands means their earnings are faltering.
Everyone’s worried what will happen to the market if there’s no “stimulus” bill passed this year.
They’re worried about a contested election and how markets will deal with that.
And investors are worried about what a reconstituted Congress might do to kill the bull market.
Me, I’m not worried because there’s another side to every coin and every negative story.
Here’s the heads-up on the other side of the bad news, and what’s good for the market.
The Other Side of Virus Fears
We’ve been living with the novel coronavirus since February, it’s not novel, or new, anymore. We know what happens to economies, to businesses, to workers, to consumers when there are shutdowns, and we know how devastating lockdowns can be.
It doesn’t look like COVID-19 is going anywhere, if anything it looks like it’s coming back around in a second wave.
But better treatment protocols are keeping more symptomatic people from being hospitalized at anywhere near rates we saw in February, March, and April.
As far as prospects for a vaccine, according to the World Health Organization, “There are currently more than 100 COVID-19 vaccine candidates under development, with a number of these in the human-trial-phase.”
And, we know, and now the President and his Administration knows, wearing masks and social distancing matters.
Spikes will happen because the virus hasn’t been irradicated. But there will be fewer full shutdowns and fewer lockdowns as our understanding of the virus’s course sinks in and government officials learn to manage health imperatives and economic imperatives simultaneously.
The fact is, investors have already looked past the worst of the virus’ impact on the economy and been actively betting stocks have nowhere to go but up.
The Other Side of Layoffs
Last month’s unemployment rate coming in at 7.9%, better than August’s 8.2% rate, and monumentally better than April’s 14.4% rate, is still too high. On top of stubbornly high unemployment, investors are worried about recently announced big corporate layoffs.
Walt Disney Co. (NYSE:DIS) announced furloughs and layoffs of 28,000. Boeing Co. (NYSE:BA) announced 19,000 layoffs. Airlines and airports have announced cumulative layoffs of more than 100,000 workers. And there are more shoes to drop.
But, as unfortunate and frightening as layoffs are, seasoned investors understand they’re part of “resizing,” cutting overhead, reducing costs, getting leaner. Historically, stocks usually bounce higher after layoffs are announced, precisely because investors have come to understand it’s what they must do to reset themselves for future growth.
While mass layoffs in some industries isn’t an all-clear, go ahead and jump into those stocks kind of sign, it is a sign of the times, and history tells us what won’t kill us makes us stronger.
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The Other Side to Stimulus
Stimulus is just a matter of time.
Everyone’s worried we won’t get stimulus, consumers won’t have money to shop, businesses will fold, earnings will suffer, and stocks will fall backwards into the same hole the economy’s trying to climb out of.
But there is another side to no stimulus, and that’s stimulus.
The market sold off in dramatic fashion yesterday when the President tweeted, he wanted the stimulus negotiations to stop. But, because he knows the market is prone to selling off when stimulus comes off the table, and a strong stock market is one of President Trump’s shining achievements, he’s not going to let it crash right before the election.
So, he tweeted more yesterday, more specifically that he’s open to “immediately” signing a bill that delivers citizens $1200 checks and helps airlines.
Look how markets are trading today. They’re bouncing because they got the message, they know the President sees the handwriting in the stock market’s daily machinations.
Besides, even if there isn’t stimulus before the election, and equities selloff, they won’t go too low for too long, because everybody knows whoever gets into the White House, no matter what Congress’ make-up is, we’re getting stimulus and probably several more rounds of it.
Investors should be ecstatic about that, and they are, even if they’re still nervous.
The Other Side of the Contested Election
Yes, there’s a lot that can go wrong this year, with voting machines, with polling stations, with post offices and postmarked ballots, and anything and everything we can’t even imagine, we may be in for a dose of all of it and more. So, yes, this election could be contested, for the Presidency and for Congress.
But it will all be resolved, however long it takes, there will be a smooth and normal transition of power, as there always has been.
Investors might get anxious, but the country moving forward, the economy moving forward, Americans moving forward, will encourage investors that a political storm isn’t the same thing as an economic storms, and we know how to deal with those, now more than ever before.
Lastly, there’s no reason investors should fret about who wins the White House of even what Congress’ make-up will be.
No matter who wins it’s in everyone’s interest to make money, to fix the economy, to strengthen capital markets, strengthen the country’s defenses, insure the public’s health, and make sure the stock market reflects the country’s optimism, retirees hopes and dreams, and is a safe place, especially for the millions of young, new retail investors who see the stock market as a place where they can pursue the American Dream.
That’s why I’m not worried and how I know the markets are going higher.