July 22, 2021
Are you getting déjà vu?
It’s been 16 months since the infamous stock market crash in March 2020. I argued back then that the market sell-off was overdone, and even encouraged by corporate media that were welcoming anything that could place then-President Trump in a bad light.” Market Meltdown: Dow Plummets 900 Points on Covid Fears,” said one headline.
I also stressed if you could see through that media noise, it was a buying opportunity… Because no matter how challenging the coronavirus would become – we are a capitalist nation. Smart companies would develop vaccines. The nation would open back up, and in time, America would be back on its feet.
I was right.
We got vaccines in record time (something the former administration gets little credit for), and sure enough, the economy bounced back.
And, yet – here we are, more than a year later, struggling with the exact same issues. The contagious Delta variant of COVID-19 is spreading, with only about half the U.S. population now vaccinated. Investors are worried: Will the global economy shut down again? How about the U.S. economy? What will that do to stocks?
Naturally, airline, travel, and leisure stocks would all be hit in this scenario. Oil prices, too, could suffer, since demand would weaken in a global economic retreat due to the Delta variant.
I don’t dispute that, but I do encourage you to keep your wits about you, your head in the game, and understand that while there may be short-term volatility, ultimately you want – and I’d argue (in part because of my inflation concerns) you need – to be invested in this market.
Most importantly, take a deep breath. Because here’s the good news… We’ve seen this movie before and we know how it ends.
Time Flies When You’re in Lockdown
Déjà vu is happening in more ways than one right now… It’s hard to believe it’s been nearly a year and a half since the nationwide lockdown.
I was planning a trip to Switzerland to ski last March. Of course, it got canceled. And this summer, I was hoping to make up my trip. I love hiking and wanted to hit the Swiss Alps for some extra long walks. But increasingly it seems this vacation won’t happen either…
Although Switzerland announced it was opening its doors to Americans on June 28, the restrictions are growing rather onerous and could likely get worse in the coming weeks.
It’s Europe, after all… I mean, consider France: French President Emmanuel Macron already announced the country’s plan to require all people (visitors and citizens) to show proof of a COVID vaccine before entering a restaurant, bar, or shopping mall. Failure to do so will result in a six-month jail term. Meanwhile, businesses that fail to ask for proof of vaccine ID will be hit with a 45,000 euro fine. (How’s that for draconian?)
All this as the U.K. cautiously tries to reopen…
To a certain extent, this should be expected – Europe is far less interested in liberty than us Americans.
So, the question now is: Will we see vaccine “passports” or additional lockdowns in the United States, too?
I’m not sure if you remember books, America, but it’s what people used to sink their faces into to avoid dealing with family and strangers. Our editor-in-chief, P.J. O’Rourke, has written a few in his time, and he’s re-releasing his bestselling Eat the Rich, complete with a new chapter to take on the absurdity of 2021 economics. And as an American Consequences subscriber, you can have access to the newly released edition for free! Claim Your Copy Now.
Already some U.S. communities are considering moves to crack down on the potential spread of the Delta coronavirus variant. In Los Angeles, for example, the local government is reinstating its mask mandate.
Meanwhile, throughout the country, there is talk of making vaccines a requirement for attending certain academic institutions, or even public schools.
On Monday, a federal judge upheld Indiana University’s requirement that all students must comply with the school’s COVID-19 vaccine mandate for the fall semester.
In this case, the U.S. district court judge rejected the argument made by eight students that the school was violating their rights, writing:
This university policy isn’t forced vaccination. The students have options – taking the vaccine, apply for a medical exemption, apply for a medical deferral, taking a semester off, or attending another university.
Indiana is a state university and thus receives public taxpayer funding. More than 500 colleges and universities across the U.S. are trying to mandate the COVID-19 vaccine, and this latest ruling might suggest they will be successful in their efforts.
More importantly, because closures will affect the ability of local economies throughout the country to succeed, the issue of whether children will be fully back in class this fall is another issue investors will need to consider.
Already, the National Education Association (“NEA”), America’s largest teachers’ union, is leading teachers’ unions across the country to demand that every student and faculty member be vaccinated before returning to school in September.
Corey DeAngelis, the head of the union, recently said in a tweet:
The NEA will call for mandatory safe and effective COVID-19 vaccination and testing for all students and staff before returning to face-to-face instruction in the fall, subject to medical exemptions.
Yet, the FDA hasn’t even approved a vaccine for children under 12 (and doesn’t anticipate having one available until at least December). So, this is going to be a major problem for millions of American families. Plus, many parents may be worried about vaccination side effects in healthy young children who are less at risk of the virus anyway.
Could elementary schools shut down again? (See what I mean about déjà vu in more ways than one right now?)
The teachers’ union will (just like before) threaten to hold the American economy hostage. President Biden, who has repeatedly shown little ability to stand up to the NEA (he differs from Obama in this respect… who was willing to confront the teachers’ union), is expected to support its decision and may even argue for more unemployment benefits and COVID stimulus checks if parents can’t return their children to in-person learning in the fall.
Hey, why not? It’s a good chance to offer more free money.
And the COVID lockdown cycle will repeat itself all over again… although (hopefully) to a lesser extent.
If this happens, and there’s most definitely a chance it will, the markets and the economy will suffer. That’s why you are seeing an increase in stock market volatility right now.
Nonetheless, there’s an important takeaway for investors in this, and yes, it has something to do with déjà vu.
As bad as lockdowns and shutdowns are, we got through this before – and we will definitely get through it again. The long-term implications of so much spending, including possibly more stimulus, are a whole other issue for another day, but something I remain concerned about because I anticipate that this spending will lead to mass inflation in the future.
But remember this… Since the dark days of March 2020, the market has rallied significantly. The S&P 500 Index rallied 97.4% on a total return basis (dividends included) since March 23 of last year. During that same time, the Nasdaq Composite Index is up 113.5% on a total return basis.
Meanwhile, according to the National Bureau of Economic Research, the COVID recession ultimately proved to be one of the shortest (albeit deepest) recessions on record. It officially lasted just two months – from February 2020 through April 2020. (Yet, 10 months after the recession had ended, team Biden was still issuing more COVID-19 stimulus checks.)
So while politicians and unions may seize this moment to shut the country down in some way again (and, of course, issue more checks), American businesses will manage… And I suspect the American people this time will be more immune to the hysteria perpetuated by the media.
Now I should clarify for anyone who might think I’m being too careless with the threat of COVID and the Delta variant – I take it quite seriously, and if you are someone in a high-risk category, I absolutely encourage you to do everything possible to protect yourself.
However, I respect individuals and their individual choices on this issue. Our economy would have performed far better had our lawmakers respected the power of the individual and allowed businesses to reopen sooner than they did.
As you well know, it was the small-business owners who were most affected, given that the larger businesses were, in many cases, permitted to reopen.
For anyone who might doubt the power of the individual and business owners to make the right decisions for themselves, I would encourage them to consider a case study into Florida versus California.
In Florida, Governor DeSantis (who may very well be the Republican nominee for president in 2024) proved that a state could be open and kids could go to school during COVID’s reign. The state has a much larger elderly population than California (which still remained shut down until just recently) and should have therefore been at much greater risk. Yet the numbers show that ultimately, Florida did better – and lost far fewer elderly folks than California.
We all could learn a lesson or two from Florida. (But of course we won’t.)
One difference this time around is that the media will not be out to get the administration in quite the same way (although CNN, with its plummeting ratings, is certainly looking for a story it can hook the public on, and as they say, “fear sells”). So hopefully there will be a more coordinated and less draconian approach to managing the Delta variant.
But don’t be too sure. Politicians are politicians after all… And this might be their opportunity to get more spending through.
Five Billionaires Give Inflation Warnings while this Former Goldman Banker Urges These Four Steps To Take Right Now.
So, what should investors do?
Let me start by reminding you that you need a well-diversified portfolio. I know we hear this all the time… But seriously, I can’t stress this enough. And even though I may recommend certain sectors or even specific stocks, ETFs, or commodities, it’s critical that your portfolio be balanced toward your appetite for risk.
Frequent American Consequences contributor Dr. David “Doc” Eifrig joined me this week on my podcast. You may be familiar with Doc’s breadth of financial experience… He worked at Goldman Sachs on Wall Street for decades before joining Stansberry Research, and he’s known as the company’s retirement guru.
Doc agrees with me about keeping a clear head in investing, especially when there’s a lot of market noise and volatility. He reminds us not to let emotions interfere with financial decisions. (Doc just revealed his new four-step investing plan, which he says should help you protect and grow your wealth, and perhaps even sleep better at night. You can click here to learn more.)
Meanwhile, I’d encourage everyone to remember that if we see additional mini-lockdowns – or even big ones – the market may get bumpy. But assuming there’s no overarching risk, we can manage it.
In 2008, we experienced something else entirely… That was a systemic financial problem that took years to get out of. Although, interestingly, even though we were struggling economically with the aftermath of 2008 for years to come – and arguably didn’t see real growth until the change in administration and therefore different economic policy – the reality is that the market still performed remarkably well in those ensuing years.
The bottom line is when everyone else panics… You should stay calm.
Easier said than done, I know. But I’ll remind you of this: Never bet against America. We may have our challenges, our divisions, and our eccentricities… but we are still the very best, freest place to be. And our economy is still the engine of the world.
We can handle pretty much anything… including Delta.
Love us? Hate us? Let us know at [email protected].
Publisher, American Consequences
With Editorial Staff
July 22, 2021