The Market Looks Forward

“When you put a fire under a pot, you learn what’s in it.” — Malcolm X

If a deadly pandemic overtakes the world, but the market looks past it, did the pandemic really happen?

The equity markets staged a dramatic rebound during the quarter as local economies opened across the country.  The question for investors is, how can the market turn so positive when data points to rough months ahead?

The short answer is “because the market is forward looking.” Investors are peering many months into the future to a point when Covid-19 fades away, the population gains herd immunity, or researchers find an appropriate treatment or cure. Investors are looking past current data towards a recovery. 

Should the Market be so confident? 

Our World Has Changed

“Crisis does not create character; it reveals it.” – Jim Stovall, Wisdom for Winners

In just a few short months, our world has changed. 

Even the word “pandemic” is scary.  Health officials have labeled the coronavirus as “novel,” because the human species has never been exposed to it.  We seemingly have no natural antibodies. As the news of the virus has unfolded, and nations and communities accepted that our first (and possibly only) line of defense was the concept of “social distancing,” I gained a newfound respect for survivors of previous pandemics. The Bubonic Plague. The Spanish Flu.  Or even 1612 when Native Americans welcomed the Pilgrim settlers traveling from Europe bringing with them smiles, smallpox, and leptospirosis[2]