JUST PLAIN TALK: America has not responded to COVID-19 well
The day before my deadline, the Dow Jones Industrial Average crossed 30,000. On cue, people shouted hooray for their side. Trump’s boosters claimed it was a vindication of his economic policies while Biden supporters gleefully pointed out the market reacted to a Biden victory. Both sides’ argument has merit but the reality is there were more buyers than sellers. A wise man once noted in the short term markets are a voting machine but in the long term, they are a weighing machine.
Effective and safe vaccines, coupled with more effective treatments, may usher stronger growth in 2021, but near-term we have COVID-19 cases spiking along with possible lower fiscal stimulus. Bob Doll, chief equity strategist with Nuveen, warns the divergence could lead to volatile markets. In light of rising equity markets, he points out October retail sales disappointed analysts with weekly unemployment claims increasing, a statistic unseen for several weeks.
While Mr. Doll is more circumspect, the lack of additional fiscal stimulus concerns me. Treasury Secretary Mnuchin’s termination of several Federal Reserve lending programs appears to be politically motivated. I understand fiscal responsibility but when the house is burning you don’t worry about water damage. While the long-range forecast is strong there is the potential for economic turmoil and the lack of available resources could be catastrophic.
Over the last three months, emerging markets have trounced the S&P 500. Yes, three months is a narrow timeframe but it is also an inconvenient truth that many countries, particularly in Southeast Asia, have handled the coronavirus epidemic much better than we have. One reason the U.S. struggles with COVID-19 is a virulent dose of anti-intellectualism. Despite warnings from public health experts, many Americans believe fervently COVID-19 is no worse than the flu, death tolls are exaggerated, and masks
are not effective.
Because of my lifelong passion for reading and terminal nerdiness, I decided to reread William Bernstein’s excellent book, “The Birth of Plenty.” In it he argues the developed world’s prosperity over the last two centuries depends on property rights, functioning capital markets, affordable communication and transportation, and scientific rationalism; without any of them, wealth doesn’t grow.
Long before Copernicus and Galileo, astronomers in the Middle East discovered the Earth was not the center of the universe. In response, religious leaders destroyed the observatories. Hindu scholars in India discovered the zero while Western Europeans were stuck with clunky Roman numerals for centuries.
At least India is an emerging market. Parts of the Middle East haven’t advanced in a millennium.
Ignoring science hinders prosperity, full stop. Essential for property rights is for the rule of law to exist. Throwing shade on a legitimate election is an affront to the rule of law. If you want your retirement assets to grow, property rights and scientific rationalism are indispensable.
You can't always get what you want, but Buz Livingston, CFP, can help you figure out what you need. For specific advice, visit livingstonfinancial.net or drop by, masked, 2050 West County Highway 30A, M1 Suite 230.