Quarterly Market Update: The Shot Heard Round the World

This phrase refers to April 19, 1775 and battles of Lexington and Concord which marked the start of the American Revolutionary War and our struggle against overwhelming odds to defeat the British. Today it can have another connotation, but potentially no less significant or daunting in nature. The United States has again been at the forefront and leading the charge with the successful creation, testing and delivering of a coronavirus vaccine in record time. Just like the Revolutionary War, this fight has seen its share of twists and turns, but I suspect that the ending will be with the United States of America proving up to the task.

Ever since November when the first vaccines were announced, I have been hearing about the proverbial light at the end of the tunnel. These “shots in the arm” help cap the malaise, fear, and tragedy that COVID-19 has wreaked on people and economies around the world. Since that time we have seen hope slowly revive as people arise and the economy and stock market rebound and grow.

During some of the darkest days in March and early April, 2020, I was on a conference call hearing about some promising research and how they were hopeful of finding a scientific solution. A massive battle was ahead that called on many people and resources. Fast forward one year, and I recently received my first dose of the Moderna vaccine. I am amazed at the progress and now the CDC tracking shows every state has at least 17.9 percent (as of 4/17/21) of their population fully vaccinated. Those numbers will continue to ramp up and it is estimated that we may achieve herd immunity in late summer or early fall.

To have identified the virus, mapped the genetic code, researched, designed, and tested, to producing and delivering a variety of vaccines around the world is a monumental success. This is the fastest vaccine creation ever and in a small way points to the promise and coming advancement that is possible in America. I suspect that the technology and actions that were focused on COVID-19 will be applied to other diseases in the coming years, but that is a vision for another day.

If 2020 was the "Year of the Pandemic," then I think 2021 will be remembered as the "Year of the Vaccine." The whole idea that things will return to some sort of "normal" is predicated on feeling safe to venture out of our homes and go about our daily lives. Delivering the vaccine is key to that. Even with the well documented and bumpy road of vaccination delivery, we are leading the world in that respect. That also plays an important role in our recovering economy. The world’s largest and most diverse economy is helping to set the stage for a coordinated global recovery.

While the vaccines are a literal shot in the arm, the government has continued to administer financial help in the form of multiple, massive stimulus shots aimed at all levels of the economy directly to the consumer and their families, businesses, local government and others. The scale of stimulus is mind bending and is more than the entire combined economies of Germany and Japan!

These efforts undoubtedly will carry consequences and many of those have been spread across headlines and news feeds. There are always concerns for investors and the old saw rings true today that the "stock market has to climb a wall of worry." One of the most prevalent worry’s today is inflation. The train of thought is this: with all the stimulus and the money that has been printed how can we not see massive inflation soon? These concerns were most recently highlighted coming out of the Financial Crisis of 2007-08. There were a lot of doomsayers then, but those fears proved overblown. There are a few intrinsic factors that help keep inflation in check today and they are:

  1. The world's population is getting older. As people retire and age they tend to spend less than a young family who is having kids, buying houses, advancing in their careers, etc… This is true across Europe, China, Japan, the USA, and others and reduces the strain on demand.
  2. Technology drives costs down and wrings excesses out of the system. Think about all the things we can do on our cell phones. How much time, effort, and money are saved everyday by technology being at our fingertips? As a small measure of how important our smart phone has become, I would much rather lose my wallet today than my cell phone.
  3. Governments around the world know how to combat inflation if needed and the Federal Reserve has tools at its disposal to curb inflation. In the meantime, a little inflation is good.

It is good to know that 246 years after “the shot heard round the world” it can now have medical connotations and not militaristic ones. It does still ring out about how relevant America is to the world. In fact, it never has been wise to bet against America and investing legends like Warren Buffet advise to “invest in America.”

What are individual investors to do? Simply put: work with your advisor to ensure your assets and wealth are working for you to achieve your financial plan. Focus on what is important to you and those close to you. Working together with the perspective gained from a long term plan that implements a solid investment plan helps cut through all the noise to focus on what you need. We are here to help address your concerns and questions.

Any opinions are those of Brian Frederick CFP ®, CIMA® and not necessarily those of Raymond James.   Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Past performance does not guarantee future results.

Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, Certified Financial Planner™, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it authorizes use of by individuals who successfully complete CFP Board's initial and ongoing certification requirements.