KRW Newsletter - 2nd Quarter 2021

“Fast is fine, but accuracy is everything.” - Wyatt Earp

The current economic recovery - which has come out firing fast and has performed better than most would have expected – has no historical precedent.  In our lifetimes, we have never seen such a deep economic collapse followed by a boom of this magnitude. However, the fast reopening of the economy has created a few misses.  In the early stages of an economic recovery, there are usually too many workers seeking too few of jobs.  Today, that opposite is true as we see labor shortages all over the labor market in addition to supply chains stressed and inflation picking up (at least temporarily).

Other indicators point to a never seen before recovery in the economy. The rate at which workers quit their jobs, a signal that workers are confident in the labor market, is the highest since before the dot.com bubble burst.

Household debt in the US is at the lowest level since at least 1980, while personal savings reached records during the pandemic. Home prices have jumped 14% since February 2020.

According to Mitch Zacks, “Many ‘experts’ predicted the pandemic would take years to recover from, but the reality is the U.S. economy may surpass its pre-pandemic size by the end of this quarter.”

In the second half of the year, the economy and stock market may continue to move fast.  While we are likely to see more government regulation and higher taxes, the support from the Federal Reserve and more than $5 trillion in fiscal stimulus to date, with more to potentially come, should continue to support the stock market and economy.

While the economy has exploded upwards, so has the stock market.  With the market (S&P 500 Index) showing more than 90% gain off the March 23, 2020 lows, it is a good time to remember that the stock market is cyclical.  The good times never last forever nor the bad times.  The important part is following a prudent investment strategy and sticking to your long-term goals.