The current economic recovery \u2013 which can now be deemed an economic\nexpansion, in my view \u2013 has no historical precedent. All economic recoveries\nand expansions look different, of course. But we have never seen such a deep\neconomic collapse followed immediately by a boom of this magnitude. It\u2019s a\nfirst-of-its-kind event.<\/p>\n\n\n\n
Take the economic recoveries from the 1990-1991, 2001, and\n2007-2009 recessions, for example. In each of those downturns, companies slowly\nresumed the hiring process, reluctant in many cases to grow the labor force\nwhen demand and growth were only trickling back to life. Unemployment in each\ncase remained high for years after the recession.1<\/sup><\/p>\n\n\n\n _________________________________________________________________________<\/p>\n\n\n\n Make the Most of This Economic Recovery Using Facts and Hard Data!<\/a><\/strong><\/p>\n\n\n\n Yes, all economic recoveries have looked different in the\npast. We are now witnessing a new event in the market, where an economic boom\nis occurring right after an extreme collapse. <\/p>\n\n\n\n This may leave you wondering if you are prepared to make the\nmost of this economic recovery? We believe that there are specific economic\nindicators and data that can help guide your long-term investment decisions.<\/p>\n\n\n\n To help\nyou do this, I am offering all readers our just-released Stock Market Outlook\nreport. This report contains some of our key forecasts to consider such as: <\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0 _________________________________________________________________________<\/p>\n\n\n\n Not the case today. Our portfolio management and research\nteams at Zacks Investment Management see stories every day of businesses struggling\nto bring on new workers, with reported shortages all over the labor markets. In\nthe early stages of an economic recovery, there are typically too many workers\nseeking too few jobs. The opposite is true today. <\/p>\n\n\n\n Other fundamentals point to a recovery of never-before-seen\nmagnitude. The rate at which workers quit their jobs \u2013 which signals worker\nconfidence in the labor market \u2013 is the highest since before the dot.com bubble\nburst. American household debt-service burdens are at their lowest level since at\nleast 1980. Personal savings reached records during the pandemic. Home prices\nhave jumped 14% since February 2020. Businesses are scrambling to bring more\nproduction online, often facing input shortages in the process.<\/p>\n\n\n\n Many \u2018experts\u2019 predicted the pandemic would take years to\nrecover from, but the reality is the U.S. economy may surpass its pre-pandemic\nsize by the end of this quarter<\/em>. <\/p>\n\n\n\n I think it is important to examine why this recovery looks so different from previous recoveries. Here are two reasons. <\/p>\n\n\n\n 1.Spurred by Event-Driven Forces, Not Cyclical Forces<\/strong><\/p>\n\n\n\n Generally speaking, recessions historically are spurred by\ncyclical forces \u2013 rising interest rates, inflation, declining asset values,\nincomes, employment, or some structural issue in the credit markets, for\nexample. Economic downturns tend to discourage consumers from spending and\nbusinesses from investing, exacerbating the weakness. <\/p>\n\n\n\n None of these conditions existed during the pandemic-induced\n(event-driven) recession and a bear market. Consumers and businesses went into\ndefensive mode, but more out of fear of the virus versus fear that the economy was\nfacing long-term damage. The federal government and the Federal Reserve\nprovided extraordinary backstops, almost immediately, to keep businesses and\nconsumers afloat. Many emerged stronger after the pandemic than before it. <\/p>\n\n\n\n There was a study performed in 2018 of New Orleans residents, in the years following Hurricane Katrina. The study examined individual tax returns and found that after a major hit initially, victims\u2019 incomes recovered within a few years and even surpassed, on average, those of unaffected workers. In short, event-driven downturns can recover more quickly than cyclical downturns.<\/p>\n\n\n\n 2. Households and Businesses Were in Good Shape in February 2020<\/strong><\/p>\n\n\n\n Event-driven bear markets and recessions can cause serious\neconomic damage if <\/em>households and\nbusinesses are in weak financial shape when the crisis occurs. We\u2019re seeing\nthis outcome across much of the developing world. But here in the U.S., households\nand businesses were in solid economic shape going into the pandemic, which set\nthe table for a rapid recovery once the event risk faded. <\/p>\n\n\n\n What\u2019s more, Americans were able to save money in record\namounts during the downturn, thanks to government stimulus payments combined\nwith business closures that essentially forced savings. U.S. households were\nsaving at an annualized rate of $2.8 trillion in April 2021, which is two times\nhigher than the savings rate before the crisis. By comparison, the annualized\nsavings rate was $734 billion in June 2009 (following the Great Recession). Accumulated\nsavings today amount to a wall of consumer liquidity poised to power the\nexpansion. <\/p>\n\n\n\n Balance sheets for households and businesses are also\nhistorically strong. For households, the delinquent share of outstanding debt\nfell to 3.1% in Q1 2021, which is the lowest rate since records began in 1999.\nThe ratio was 11.1% in 2009.<\/p>\n\n\n\n Banks also had strong capital positions entering the crisis.\nThe New York Federal Reserve estimates that financial institutions have loss-absorbing\ncapital equal to 16.5% of risk-weighted assets, which again is the highest\nshare in over 20 years. When banks are well-capitalized and in strong financial\nshape, they are generally in good condition to lend, which isgreat for the\neconomy. <\/p>\n\n\n\n Bottom Line for\nInvestors<\/strong><\/p>\n\n\n\n Many have been (pleasantly) surprised by the robust economic\nrecovery thus far, and it appears the issues in the economy today are more about\nsupply falling short of demand, which is a good problem to have, in my view. These\nimbalances (jobs, supply chain issues) should work themselves out in time. <\/p>\n\n\n\n Perhaps there should have been little surprise that the U.S.\neconomy could deliver such a strong rebound in such little time, for the two\nreasons I detailed above. The same goes for the stock market \u2013 many wondered how\nthe stocks could have delivered such strong returns in the midst of the crisis\nlast year. The economy today should offer a clear explanation. <\/p>\n\n\n\n As we move forward from here, my cautionary advice to\ninvestors would be that just as everyone starts to ignore or write off\ninflation for good, that\u2019s when you should perk up and watch for rising\ninflation and rising interest rates. It could happen sooner than you think.<\/p>\n\n\n\n As the\neconomy recovers it is essential that investors keep an eye on key data points\nthat could impact their long-term investments. To help you do this, I am\noffering all readers our just-released Stock Market Outlook report. This report\ncontains some of our key forecasts to consider such as: <\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0 Mitch examines the reasons why the current recovery is unlike any other in history<\/p>\n","protected":false},"author":3,"featured_media":8874,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-9643","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9643","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9643"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9643\/revisions"}],"predecessor-version":[{"id":10377,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9643\/revisions\/10377"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9643"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9643"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9643"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
IT\u2019S FREE.\u00a0Download the Just-Released June and July 2021 Stock Market Outlook<\/a>2<\/a><\/sup><\/strong><\/p>\n\n\n\n
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