In my last post, I wrote about how I am waiting for companies to “confess” their actual coronavirus impacts before reinvesting in this market in any meaningful way. I know from experience and historical evidence backs me up, that stocks cannot consistently rise until Wall Street sales and earnings estimates for covered companies have been lowered so far that only positive revisions can be expected from a “kitchen sink” level. Yes, the S&P 500 has bounced 29% off its March 23 low, which has started another bull market in just three weeks, but I am unconvinced that we have seen the bottom because the consensus view is that our economy will rebound as fast as it has crashed.
This “V-shaped” recession is what I hope for too, but I am not foolish enough to bet on it or at least not yet—case in point. Consider the restaurant industry. They are about a million such outlets in the U.S. Even the chummy National Restaurant Association expects that 20% of them will permanently close.
There are 16 million people in our country who are directly employed by restaurants. If one in five restaurants does not survive the coronavirus, that means that we will permanently lose 3.2 million of these jobs if the math works. That is about 2% of the entire U.S. workforce structurally (not temporarily) unemployed! We need to think through the knock-on effects of the coronavirus. How much of our economy will we lose, and how quickly will it return?
Furthermore, in the post-coronavirus world, do large swaths of it disappear? What digital businesses will supplant the analog ones? For every burger joint that’s wiped out, hopefully, there is an online innovator that fills the void. Unfortunately, it is too early to answer most if any of these questions, so I continue to invest uber-cautiously.
Please stay tuned. In the meantime, if you have any questions and want to review your financial portfolio or if your an advisor and have any questions, give us a call at 716-568-8566 or fill out the easy form here.
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