The Ghosts of March 2020 Are Haunting This Market
|By Mike Larson|
Remember March 2020? I sure do.
COVID-19 caseloads skyrocketed. Airports, train stations and cruise terminals were shuttered. Layoffs exploded. Businesses and consumers went into full lockdown mode.
It was a scary, unprecedented time to be sure ... one that many investors have tried to put behind them.
But last week, U.S. stocks plummeted the most in any week since then. The S&P 500 lost just under 6% in only five trading days, extending the bear market that "officially" began on Monday.
How can that be? What has markets running so scared? Aren't we in better shape now than we were back then?
Yes, the worst of the pandemic is behind us. Deaths are waning and full-scale lockdowns are history. But the effects of the pandemic are still haunting this market:
- Supply chains for all kinds of goods are still snarled.
- Many companies that laid off workers still aren't fully staffed.
- And those supply issues are like sand in the gears of the American economy.
Meanwhile, the trillions of dollars in stiumulus the government threw at the pandemic helped juice demand enormously and encouraged investors to chase bad investments.
Now, we have the worst inflation in more than four decades while dozens upon dozens of garbage companies are crashing and burning, just like in the dot-com bust.
To make matters worse, the Federal Reserve completely whiffed on recognizing problems and adjusting monetary policy to compensate. That's forcing policymakers to act aggressively by hiking interest rates in big chunks. That includes from last week the single-biggest hike (75 basis points, or 0.75%) since 1994.
And of course, energy prices have soared, too. Most of the country is paying around $5 per gallon for gasoline, a nominal record. Natural gas and diesel have surged as well, driving up electricity and transportation costs.
That leaves us in a precarious position. Unlike during the depths of the pandemic, the government's hands are tied. The same goes for the Fed.
They can't flood the economy with stimulus funds again because inflation is so high. There just aren't any easy, quick or painless solutions.
Bottom line? This isn't the time to be a hero with high-risk investing. It's time to buckle down, buckle up, and invest using Safe Money strategies.
Someday we'll exorcise the ghosts of March 2020 once and for all. But until then, you have to invest for the markets we have, not the ones we want.
Until next time,