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Investment Insights, Inc.

Less Bad

Think of someone in really bad shape, limping with a cane, obese, struggling mightily just to walk up a few steps. Sounds pretty bad and that person’s future might look pretty grim.

But you don’t know how they got that way. It could be a person in decline or it could be someone on an upswing. Imagine if our imaginary person were recovering from an accident and had previously been unable to walk at all. Maybe now now they could not only walk but were also doing rehab exercises and had lost 50 lbs.

All of a sudden what seemed really bad looks really good.

So it is with the US economy.

The recession is over. Recessions don’t end when the economy has fully recovered. They end when things stop getting worse and start getting better. Officially the Bureau of Economic Cycles won’t tell us the recession is over until we get 2 consecutive quarters showing economic growth. Once we have that, they will go back and try to figure out when the recession ended. Was it in April? May? June? Probably one of those and it will be interesting to find out which, but the point is, it will almost certainly be sometime earlier this year than we are now.

Over the Labor Day weekend hotel occupancy was around 50% across the country. That’s not a great number but it’s miles better than it was in May. TSA tells us that same weekend air travel was down roughly 60% from last year. That’s really bad, except it’s a lot better than when we were down about 90% back in April.

The recession is over, but things aren’t good yet. The United States economy is still recovering from an accident. We’re still walking with a cane, struggling up those steps. But we are making progress.

If you didn’t read any news at all and only looked at stock prices you’d think the economy was humming along at full capacity. Don’t let this confuse you. No, the stock market is not wrong, it’s just early. And that’s completely usual.

Investments are made in the hope of future returns. Imagine a friend comes to you and asks if you want to invest with him to open up a coffee shop. He’s going to run it and you just put up the money as a silent partner. The money you give him buys you part ownership of a coffee shop that has not yet opened, has no customers and no sales. But you invested because you believe all those things will happen – the shop will open and there will be paying customers – and you will make money in the future!

It’s been said that the stock market looks roughly 9 months ahead. I have no idea if that estimate of time is correct. It seems probable but it also is very likely that the amount of time that investors look into the future varies considerably.

But if we assume 9 months is more or less correct, then investments being made today are based on expectations for June of 2021.

By then most of us think we will be out of the pandemic and if the economy is not fully recovered to pre covid levels, it should be well on its way.

Maybe that will come true. We can’t know for certain. That’s the nature of investing. Because we invest for future return, we can never be 100% certain of the outcome because we can never know the future with 100% certainty.

If all vaccines fail and the pandemic continues to roll on then today’s stock prices are far too high. But if we beat this thing in the expected time frame, then stocks may be where they should be. I know, those prices are based on where we think things will be next June. We’re not there yet. Right you are! So where will prices be when we get there?

I really don’t know except I know this much – they will be at a level that makes sense relative to expectations for sometime in 2022. In other words, what appears to be a disconnect between the economy and the stock market really isn’t. It’s just two different time frames. The economy is now. The stock market is the future.

Hal Masover is a Chartered ReOrement Planning Counselor and a registered representaive. His firm, Investment Insights, Inc is at 508 N 2nd Street, Suite 203, Fairfield, IA 52556.

Securiies offered through, Cambridge Investment Research, Inc, a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representaive, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Investment Insights, Inc & Cambridge are not affiliated. Comments and questons can be sent to These are the opinions of Hal Masover and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. Past performance is no guarantee of future results. Indices mentioned are unmanaged and cannot be invested in directly.

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