{"id":217,"date":"2020-07-20T14:26:00","date_gmt":"2020-07-20T14:26:00","guid":{"rendered":"https:\/\/401advisor.com\/?p=217"},"modified":"2021-09-30T14:29:05","modified_gmt":"2021-09-30T14:29:05","slug":"and-the-dam-bursts","status":"publish","type":"post","link":"https:\/\/401advisor.com\/?p=217","title":{"rendered":"And the Dam Bursts\u2026"},"content":{"rendered":"\n

Like an Orc being washed away by the waters behind the dam after its destruction, markets shorts are finding it equally hard to find their footing.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

While many market pundits keep talking down the economy and scream that the market is \u201covervalued\u201d leading to crash comparisons to (you choose) 2000-2002 Tech Wreck or the 2008-2009 Financial crisis, the market continues its upward trend.<\/p>\n\n\n\n

Should investors be fearful? We think not. This has the makings to the start of a truly historic bull run. It may end ugly when it ends, but that could be a long way off.<\/p>\n\n\n\n

Let\u2019s look first at the economy. Readers should be familiar with the work done at www.econpi.com<\/a> as I referenced it many times in the past. Quick refresher, http:\/\/www.econpi.com<\/a> does a nice graphic for where the economy is, and by looking at past graphs you can clearly see where the economy came from.<\/p>\n\n\n\n

\u201cIt\u2019s the Economy, Stupid\u201d<\/u><\/strong> \u2013 <\/strong>James Carville<\/p>\n\n\n\n

First, here is where the economy was prior to the Covid 19 outbreak:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

The Red MOC \u2013 Mean of all the data coordinates and the Green LD \u2013 Leading Indicator plots are in the economic expansion quad.<\/p>\n\n\n\n

The average for June:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Clearly in recession for both May and June.<\/p>\n\n\n\n

And here is the first week of July:<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

We have moved into the recovery quad. This is a big incremental change in a week. While there is concern about the closing of the economy, most seem to agree that with masks and social distancing most businesses other than bars and fitness clubs will be opening, even if on a limited basis. Many pundits claim that business will take years to return to normal. I strongly disagree. The flood of consumers to beaches, restaurants and bars indicates to me a consumer that is desperate to return to their normal lives. The biggest exception I see is the airline and cruise industries.<\/p>\n\n\n\n

\u201cDon\u2019t Fight the Fed\u201d<\/u><\/strong><\/p>\n\n\n\n

Probably the one universal piece of advice to follow as an investor. This is from Fed Chair Powell,<\/p>\n\n\n\n

\u201cThe Federal Reserve is strongly committed<\/strong> to using our tools to do whatever we can for as long as it takes to provide some relief and stability to ensure that the recovery will be as strong as possible and to limit lasting damage to the economy\u2026 The Fed will continue to use these powers forcefully, proactively, and aggressively<\/strong> until we\u2019re confident that the nation is solidly on the road to recovery.\u201d <\/em>(Congressional Testimony on 6\/30\/20)<\/p>\n\n\n\n

How forceful? The Fed has already announced the creation of facilities to buy corporate bonds, asset backed securities, ETFs and now they have directed Blackrock to buy individual securities for the Federal Reserve account. <\/strong>None of which is allowed by Fed charter. <\/strong>And thus the above reference to the dam breaking. The Fed has literally unlimited resources to print money with the apparent adoption by this administrations of Modern Monetary Theory. There is no theoretical limit to money printing until the economy reaches full employment again. The dam has literally broken.<\/p>\n\n\n\n

But let\u2019s hear it from someone else, hedge fund billionaire and owner of the Milwaukee Bucks Marc Lasry in a Market Watch interview,<\/p>\n\n\n\n

\u2018I know you\u2019re not supposed to say this, but it\u2019s a once-in-a-lifetime opportunity. You\u2019re not going to see this again: Where you\u2019ve actually got an economy that\u2019s fine, and you\u2019ve got a Fed pumping trillions of dollars in.\u2019<\/em><\/strong><\/p>\n\n\n\n

Negatives? As always there are concerns, and the prudent investor needs to remain wary. Expect volatility especially over the next couple of weeks as earnings are announced for the second quarter.<\/p>\n\n\n\n

The market is building up fuel like a California Forest waiting on a lightning strike to set it off. The lightning for the market? Hopefully a treatment or vaccine for Covid 19 that is actually available to the public.<\/p>\n\n\n\n

Warning<\/u><\/strong><\/p>\n\n\n\n

How volatile the market is over the next six months is anyone\u2019s guess. Between constant Covid 19 news, the election, riots, and protests daily gyrations could be severe. I personally think the biggest test will be if schools open and remain open in the fall. No schools and no football will be a huge psychological blow. If you have cash on hand now we strongly suggest picking and choosing several entry points over the next few months. No one can predict the short term, but the longer term outlook is looking very bullish.<\/p>\n\n\n\n

Mr. DeShurko is the Managing Member of 401 Advisor, LLC an independent registered investment advisor. Jim Kilgore CFP \u00ae is an Investment Advisor Representative of 401 Advisor, LLC. They are also registered representatives of Ceros Financial Services, Inc. (Member FINRA\/SIPC).  Ceros is not affiliated with 401 Advisor.  The views expressed are those of Mr. DeShurko and do not necessarily reflect those of Ceros Financial Services, Inc., its employees, or affiliates.<\/em><\/p>\n\n\n\n

Past performance is no guarantee of future results. All investing involves risk. Investments mentioned are not meant to be specific buy or sell recommendations without being taken in the context of an investors\u2019 entire portfolio or investment objectives. Consult an investment professional before investing. <\/em>
<\/em><\/p>\n\n\n\n

And be sure to check out Jim\u2019s new podcast: https:\/\/podcasts.apple.com\/us\/podcast\/401-advisor\/id1511923745<\/a><\/u><\/strong><\/p>\n\n\n\n

 P<\/strong><\/a>lease email either of us with your questions and we will address them on future podcasts.<\/u><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Like an Orc being washed away by the waters behind the dam after its destruction, markets shorts are finding it equally hard to find their footing. While many market pundits keep talking down the economy and scream that the market is \u201covervalued\u201d leading to crash comparisons to (you choose) 2000-2002 Tech Wreck or the 2008-2009 […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[3],"tags":[],"class_list":["post-217","post","type-post","status-publish","format-standard","hentry","category-finance"],"_links":{"self":[{"href":"https:\/\/401advisor.com\/index.php?rest_route=\/wp\/v2\/posts\/217","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/401advisor.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/401advisor.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/401advisor.com\/index.php?rest_route=\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/401advisor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=217"}],"version-history":[{"count":0,"href":"https:\/\/401advisor.com\/index.php?rest_route=\/wp\/v2\/posts\/217\/revisions"}],"wp:attachment":[{"href":"https:\/\/401advisor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=217"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/401advisor.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=217"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/401advisor.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}