Most of our thoughts about the overall market landscape are contained in this week’s headline piece. Obviously, the market is rewarding perceived beneficiaries of covid-related changes, and punishing companies that are believed to be challenged by them. This week we discussed some of the tech beneficiaries, especially in the e-commerce and fintech industries; in coming weeks we will touch on more.
Fiscal programs and monetary policy are working in concert to provide unprecedented excess liquidity to markets, far above what would be needed to track simple economic growth. The overwhelming story is that this liquidity is finding its way into financial assets, and will continue to do so. The support of the Federal Reserve was unequivocal shock and awe from the beginning of the crisis, and Chair Powell has taken every opportunity to emphasize that this support will be of whatever size and duration is necessary to see the economy through the pandemic’s after-effects. Particularly with yield curve control on the table, and already finding success in its implementation in Australia, we believe that we can look forward to years of low interest rates, and likely of low inflation, as we wrote last week.
Therefore, we believe that investors would be wise to look for growth-oriented stocks in the sectors and industries clearly benefitted by social and economic changes wrought by the pandemic. We’ll continue to bring these to your attention.
We also believe that even in a low inflation and low interest rate environment, gold can do well. It will benefit from the growing skepticism that accompanies rapidly expanding government debt and central bank balance sheets, as well as from volatility occasioned by political turmoil. We would also use dips to add to gold for the long term.
Thanks for listening; we welcome your calls and questions.
