Are We In A Bubble?

As Warren Buffett once said, “Only when the tide goes out do you discover who’s been swimming naked.” The tide hasn’t gone out yet. There will probably be some type of scandal if there is a sustained bear market. It would probably need to last for at least 2 years. Furthermore, there would need to be major failures. Basically, the exact opposite of today. The fact that we aren’t at the end of an economic cycle doesn’t mean stocks can’t fall into a bear market. The stock market can easily decline while the economy gets healthier. In fact, if low economic growth resurfaced for whatever reason, major market indexes, which are heavily weighted with tech stocks, might do relatively well in that environment, since tech stocks outperform in that environment.

Massive Income Gains

It is impossible to overrepresent the massive income gains Americans will receive in the next 6 months through transfer payments and job gains. This will create a boom in consumer spending and GDP growth. It’s worth noting that the highly speculative stocks haven’t done well in the past couple of weeks in spite of the stimulus payments going out. The problem was that so many people anticipated a boom, that they bought stocks ahead of this, ending any chance of a rally. Plus, more people are spending the stimulus money on the real economy compared to the previous stimuli because there are more spending options.

As you can see from the chart below, in March personal income will surpass the peak following the April stimulus. Wage compensation has fully recovered because the people who lost their jobs are in the low-income group. That being said, most of the jobs added in March will be in that group. We expect leisure and hospitality to add well over 200,000 jobs in March and the overall economy to add well over 500,000 jobs.

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Disclaimer: The content in this article is for general informational and entertainment purposes only and should not be construed as financial advice. You agree that any decision you make will be ...

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