Get Ready For a Fall!
Everyone is waiting for the $1.9 trillion relief bill to get approval from the U.S. Senate. Parents are waiting for their local school districts to open for in-person school. Small business owners are waiting for states to decide on opening in-person dining to start getting the economy on track.
The good news is that the vaccine distributions are improving around the country, and death rates are beginning to decline. With unemployment hovering at 6.3%, the economy remains weak. New jobless claims are 730,000 for February, and the St. Louis Fed reported consumer price index is up over 1.5% from January 2020.
The rise of the consumer index to 1.5% over January 2020 is a concern because it indicates that inflation may be on the horizon. With so much money pumped into the economy, this will cause interest rates to rise, and the economy will not grow as fast to recover from the pandemic. I am not against people getting money to help them through the pandemic. I hope that the Biden administration and Congress provide more fiscal stimulus to create jobs by improving our highways, bridges, electrical power grid. Also, invest in green energy. Not to provide electric car subsidies so the rich can drive around feeling good about not polluting our environment.
A fiscal policy like improving the electrical grid system, investing in green energy, and providing better education opportunities provides more significant societal benefits. Most of my conservative advisor friends probably will disagree with me. They will accuse me of being a liberal progressive, but who cares. Also, monetary and fiscal policy over the last twenty years has contributed to the economic disparity between the have and have nots. Plus, the disappearing middle class. People need jobs!
I hope that U.S. Congress provides more support for infrastructure investments, green energy, and less time in political gamesmanship. More of this type of government spending
might lower the chances of delaying the economic recovery for the average person.
STOCK MARKET OUTLOOK
"Throughout history, bubbles are a function of extraordinary popular delusions and the madness of crowds." Quote by Lance Roberts.
Here are my reasons that the U.S. Stock Market is in bubble psychology:
Investors believe the Federal Reserve is supporting a low-interest rate indefinitely.
Investor greed is driving over 1.3 billion shares traded on the NASDAQ-fear of missing out (FOMO).
Ninety-two million millennials believe that the stocks will only go up—trading on Robinhood, Bitcoin, and options.
FAAMG-is an acronym that refers to the stocks of five prominent American technology companies: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG) will continue to grow and not slow down.
Initial Public Offering-IPO's stocks with record valuations in the billions despite not having a long history of sales and profits.
The vaccines will cure COVID-19. Thus the jobs and economy will recover immediately.
Tesla is worth more than the top 25-selling automakers, including Ford, General Motors, Toyota, Honda, and Volkswagon.
Small investors are buying stocks with their stimulus and unemployment benefits.
As Lance Roberts's quote stated, the financial industry and social media functions promote "extraordinary popular delusions and the madness of crowds." Plus, despite my best intentions, I try to be Spock-like lack emotion when investing. Emotions affect our investment decisions. An emotional bias we all have as humans arises from impulse, intuition, and feelings and results in irrational decision-making. Emotional biases tend to be difficult to correct because they are ingrained in our emotional psyche. "Investing is an easy game if you can control your emotions." Buffett also remarks that "An essential quality for an investor is temperament, not intellect."
So, what does the small, inexperienced investor do now? I recommend sitting on the sidelines for now, and in the immediate future-until, we see the bubble pops. Use your cash to pay your debt down and build up your emergency savings. I have 70% of my retirement money in cash and a short-term Treasury Bill mutual fund. I am waiting for the bubble to pop and sleeping very well at night.
P. S. don't read those pop-up advertising on where to invest your $1,000.
For those who want to continue to invest, I have a few suggestions. I feel green infrastructure ETF or mutual fund is an excellent long-term play. An investment in an Emerging Market Value Fund/ETF or a large stock Value mutual fund may right places to invest if you want to take on the risk. You can contact me at firstname.lastname@example.org if you're going to talk about my suggestion. These are the right areas to be if the stock market bubble pops, like the 2008 market crash, because of diversification provided by index mutual fund or ETF index and their current valuation.