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What happens next?

By: Devan Robinson


"It ain't what you don't know that gets you into trouble.  It's what you know for sure that just ain't so." - Mark Twain


Fair warning: this is a little melodramatic and soapbox-y.  I think I'm feeling the effects of social distancing!

I am a major history nerd.  With history we often know how things end but forget how they began.  We know how the Vietnam War ended but why did it begin?  Why did Britain leave the EU?  What caused the financial crisis of 2009?

As financial planners we're constantly asked for forecasts.  How will the market do this year?  When will the next recession start?  Will Apple sell more iPhones next quarter?

The truth is nobody knows.  That's what makes a market.  Anyone who claims to know what's coming is either clueless or selling something.  That's why we build portfolios anticipating bear markets and planning for the unknown.  I've been seeing many bold predictions from pundits who "know" what happens next.  Be skeptical.

What happens next?  I don't know and that is okay.  Here is what I do know:

Necessity is the mother of invention

I know that necessity is the mother of invention.  The best is usually around the corner when it feels the worst.  Coronavirus data is almost certainly going to get worse as our testing capability improves.  What follows the dire news will be nothing short of astonishing.  I've come to learn from history that any major turmoil we've faced has wrought the biggest leaps forward.


World War II

The mother of all horrific 20th century events was World War II.  It's hard to stress how much that period shaped the modern world.  This was a war that began on horseback and six years later ended with the atomic bomb.  Take anything you enjoy today and you can almost always trace its lineage to World War II.  

For example:

  • The highways we drive were built to quickly evacuate cities and mobilize the military for war.
  • Tax-deductible interest was a policy idea to keep the economy moving after wartime production ended.
  • Harry Truman desegregating the military was one of the seeds of the Civil Rights Movement.
  • Six-million women entered the workforce to support factory wartime production.  Most kept working after the war paving the way to the female labor participation we have today.  Warren Buffet argues that Rosie the Riveter was the single biggest economic event of his lifetime.
  • Why do European nations have more social welfare than us?  We won the war and Europe faced near annihilation.  That influences how much social and personal security Europeans ask of their governments.
  • Penicillin.
  • The internet.
  • Jets.  Helicopters.  Nuclear energy.  Rockets.  Rural hospitals.  Israel.  I'm sure you see my point.

Regardless of your thoughts on our government's response thus far we are finally treating COVID-19 as the fight it is.  Luckily our country is really good at fighting.  We were born fighting.

Back to what I know

I know it will get better from here.  The irony of tragedy is it often produces exactly the opposite of what we imagine in that moment.  

  • Pundits marked the death of Silicon Valley after the tech-bubble of 2000.  How are Microsoft and Apple doing?  
  • Who would've thought that September 11th, 2001 would mark the beginning of the least-violent period in human history?  I sure didn't at the time.  If the goal of terrorism was to grind western capitalism to a halt...how'd that turn out?  Our government is on the verge of FORCING US to stop going out to enjoy capitalism for merely a few weeks to combat the virus.
  • The 2008 Financial Crisis led to a stronger banking system and the longest bull market run in history. 

Great things are coming.

My Prediction

My prediction is we are witnessing a historic surge of innovation and healthiness.  We should've already been diligently washing our hands and staying home when sick - we surely will now.  Big structural changes will come of this and it will be for the better. The United States will emerge from the fever stronger and healthier.

Strong leaders will rise and weak ones will fade.  It seems to me the political leaders we view most fondly were often forged out of crisis.

We will see the best in people and our companies.  For example: the Cleveland Cavaliers continuing to pay their event staff and hourly workers despite the cancellations (as if I needed a reason to love Cleveland more than I already do).

My official prediction: this is one of those beginnings we forget in history and not the end of anything. 

Except for COVID-19...the end is coming for it, adiós .

Thanks for reading and remember to thank all of the folks out there working.  It's a great privilege to be able to sit here and soapbox.

Devan

The foregoing content reflects the opinions of Fairlead Financial Group LLC and is subject to change. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct.

 Past performance may not be indicative of future results. Securities investing involves risk, including the potential for loss of principal. There is no assurance that any investment plan or strategy will be successful, or that markets will recover or react as they have in the past.