With three potential covid solutions, it’s likely a resolution to the health crisis is right around the corner, even if two solutions fail.
For months now, cash has been pulled from the equity markets. Lots of funds have been going into taxable bonds at miniscule yields. The economy is awash in cash on the sidelines thanks to the Federal Reserve.
In the meantime, those who have stayed the equity course since the March meltdown have been benefiting significantly. Add fiscal stimulus that is likely to be coming soon. This will put many back to work. Those who retained jobs have saved funds that would have been likely expended in a “normal” economy. Folks will be anxious to get out and spend again.
All this will likely drive the economy forward.
This scenario is likely to be instilling FOMO among those who have sat on the sidelines of equity markets for a long time and seen gains that are much higher than bond yields. Using the rule of 72’s which roughly determines how many years it takes to double an investment’s value, bond yields are unbelievably small. For example, take a 2% bond yield, it would take 36 years to double an investment (72/2). An equity yield of just 8%, doubles in just 9 years (72/8).
Given the above information, I think we’re at an economic and market turning point. While I claim no access to a crystal ball, to me the preponderance of evidence points to much better times ahead. I feel that its time to move to the bullish side of view.
Be smart, be well-read, be aware and be successful!
