Their are two recent positive developments. First, it looks like the stimulus package just needs to work its way through the Senate so it is likely the government will pay out stimulus checks sometime in March. Second, the single-shot nature and easier storage requirements of the newly approved J & J covide-19 vaccine should help distribution in less developed countries that have little or no infrastructure.
Aside from these two positives, the market is showing signs of slowing momentum due to increased bond buying (greater safe-haven demand) and increased put buying (shorting the market) as well as some profit taking. This has caused the “Fear and Greed Index” to fall into the neutral category.
Higher interest rates are an additional concern. Higher long-run interest rates are caused by increased inflationary expectations which, in turn, are fueled by increased growth expectations. The Phillips curve though has disappeared, indicating that growth and inflation are no longer correlated. This should allow the Fed to continue stimulating the economy by buying treasuries and flooding the economy with money and at the same time reduce the likelihood that additional Fiscal stimulus will cause significant inflation. Like under Obama, who continually killed the economies recovery with over-regulation, Fed policy will have to keep short-term interest rates near zero throughout a Biden administration that is likely to repeat Obama’s mistakes.
Generally, policies aimed at economic fairness through increased regulation and government hand-outs lead to slower economic growth which, in turn, decrease economic opportunities for labor. These policies lead to a slow growth economy with the same level of poverty as before (e.g., the Great Society programs of LBJ and the Obama policies). The better policy set is to achieve fairness through market policies that let markets run (with a few specific exceptions) and thereby increase economic growth and economic opportunities for labor. This leads to a high growth economy with the same level of poverty as in the first scenario (e.g., Reagan Administration policies). I can’t say Trump is an example of high growth because his anti-trade policies constrained economic activity in 40% to 45% of our economy (i.e. imports + exports).
Since the “Fear and Greed Index” has pulled back from favoring greed to neutral there should be some buying opportunities that emerge. (Stock market growth is strongest when this index is in the middle of the “Greed” section.) Some growth stocks to look at include SBLK, NNM, MRNA, AXL, MT, OVV, and HWC, while good dividend stocks include: EC, JHG, LYB, MSBI, MC, ORI, SNP, CODI, and NWR. Currently, the best ETFs to own are: PSI, XSD, VTWO, IJT, and VIOG. Also, you should just buy and hold BSTZ, BMEZ, and AIO and let them DRIP. Good investing!
March 10 addendum:
I’d be picking up as many shares of BMEZ, BSTZ, and AIO as I could at this time. BSTZ just raised its dividend by over 48% and has suffered the general tech hammering lately so you can get a great yield and high rate of growth but you must buy it no later than the 11th of March if you want this months dividend.
