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The Markets Way back, when radio disk jockeys played 45-rpm vinyl singles, the A-side of a disk was the song the record company was promoting and the other side – the flip side – held a song that sometimes had an equal or greater impact. For instance, the flip side of Queen’s We Are the Champions was We Will Rock You. When it comes to the economy and financial markets, flip sides can have significant impact, too. For example:
The flip side: Concern that share prices may not be sustainable. “The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble. Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior…this bubble will burst in due time…,” wrote asset manager Jeremy Grantham of GMO in January 2021.
The flip side: Vaccines may not be as effective as many anticipate for two reasons: 1) Some Americans are reluctant to be vaccinated, and 2) Vaccines may not be effective against all strains of the virus.
That seems particularly important since employment gains have slowed. Last week, Carleton English of Barron’s reported, “All told there were 20.4 million workers receiving benefits under programs for the week ending January 23, a 2.6 million increase from the prior week. At this time last year, there were 2.2 million workers receiving benefits.” The flip side: Too much stimulus could cause the economy to overheat, lead to inflation, and cause the Federal Reserve to raise rates. The bond market has already been pushing rates higher. Last week, the yield on 30-year U.S. Treasuries rose above 2 percent for the first time since February 2020.
The flip side: While many agree U.S. infrastructure needs repair, the cost may be paid through higher taxes. There is ongoing debate about whether tax increases impede or accelerate economic growth, according to Jim Tankersley of The New York Times. In addition, government spending of this type is another form of stimulus, which could heat up economic growth. Last week, Colby Smith of Financial Times reported numerous economists have increased U.S. gross domestic product (GDP) growth estimates for 2021. Estimates ranged from 5.9 percent to 6.3 percent. INNOVATIONS CAN BE DIFFICULT TO VALUE. Throughout history, inventions and new ways of doing things have changed the world:
It would have been difficult to understand or estimate the long-term value of these innovations. It’s possible some of today’s innovations could have similar impact. One is machine learning. Machine learning uses algorithms to turn a data set into a model that can improve our understanding of a topic. For example, machine learning is being applied to:
Weekly Focus – Think About It “There is no recipe, there is no one way to do things – there is only your way. And, if you can recognize that in yourself and accept and appreciate that in others, you can make magic.” --Ara Katz, Entrepreneur Investment Advisory services offered through Guidance Investment Advisors, LLC, doing business as Guidance Wealth, LLC, a registered investment adviser registered with the Securities and Exchange Commission. SEC Registration does not imply any level of skill or training. * These views are those of Carson Coaching, and not the presenting Investment Adviser Representative or the Representative’s Registered Investment Adviser, and should not be construed as investment advice. * This newsletter was prepared by Carson Coaching. Carson Coaching is not affiliated with the named registered investment adviser. * Weekly Market Commentaries are sent as mass email communications by the designated email address weekly_update@guidancewealth.com * Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate. * Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity, and redemption features. * The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in this index. * All indexes referenced are unmanaged. 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These risks are often heightened for investments in emerging markets. * Yahoo! Finance is the source for any reference to the performance of an index between two specific periods. * The risk of loss in trading commodities and futures can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. The high degree of leverage is often obtainable in commodity trading and can work against you as well as for you. The use of leverage can lead to large losses as well as gains. * Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. * Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. * Past performance does not guarantee future results. Investing involves risk, including loss of principal. * The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee it is accurate or complete. * There is no guarantee a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. * Asset allocation does not ensure a profit or protect against a loss. * Consult your financial professional before making any investment decision. Sources: https://en.wiktionary.org/wiki/catch_you_on_the_flip_side https://www.radiox.co.uk/features/x-lists/b-sides-more-famous-than-a-sides/ https://www.barrons.com/articles/the-stock-market-keeps-rising-the-reasons-to-be-hopeful-are-also-the-reasons-to-worry-51613179045?refsec=the-trader (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_Barrons-The_Stock_Market_Keeps_Rising-The_Reasons_to_be_Hopeful_are_Also_the_Reasons_to_Worry-Footnote_3.pdf) https://www.gmo.com/americas/research-library/waiting-for-the-last-dance/ https://www.cnbc.com/2021/01/10/why-the-covid-19-vaccine-will-be-good-for-financial-health.html https://morningconsult.com/2021/02/12/analysis-1400-stimulus-coronavirus-relief-check-help/ https://www.barrons.com/articles/jobless-claims-continue-their-slow-climbdown-51613053832?mod=article_inline (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_Barrons-Jobless_Claims_Show_Uneven_Recovery-Footnote_7.pdf) https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/textview.aspx?data=yield https://www.treasury.gov/resource-center/data-chart-center/interest-rates/pages/TextView.aspx?data=yieldYear&year=2020 https://www.washingtonpost.com/transportation/2021/02/11/biden-senators-infrastructure/ (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_TheWashingtonPost-Biden_Meets_with_Key_Senators_to_Start_Bipartisan_Talks_on_Infrastructure_Spending-Footnote_10.pdf) https://www.nytimes.com/2019/12/05/business/Elizabeth-Warren-tax-increases.html (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_TheNewYorkTimes-Could_Tax_Increases_Speed_Up_the_Economy-Democrats_Say_Yes-Footnote_11.pdf) https://www.ft.com/content/a6d89494-9fac-49a8-8b0a-4f3f1870ace1 (or go to https://resources.carsongroup.com/hubfs/WMC-Source/2021/02-16-21_FinancialTimes-Markets_Brimming_with_Investor_Optimism_on_US_Economy-Footnote_12.pdf) https://www.history.com/news/11-innovations-that-changed-history https://www.infoworld.com/article/3394399/machine-learning-algorithms-explained.html https://news.mit.edu/2021/machine-learning-model-helps-determine-protein-structures-0204 https://www.axios.com/toronto-sidewalk-labs-smart-cities-stalled-distrust-big-tech-government-95cd21c4-39f6-4c9e-ae98-bc393ca85e75.html https://www.brookings.edu/research/protecting-privacy-in-an-ai-driven-world/ https://medium.com/mind-your-own-creative-business/inspiring-quotes-by-women-on-creativity-entrepreneurship-innovation-leadership-fe066ba6419b Comments are closed.
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