The Alphabet Recovery?
Almost immediately after the Covid-19 induced March collapse in stock markets and the economy, the usual pundits began to speculate on the timing and shape of a possible recovery. The most optimistic were talking about a V shaped rebound with a rapid and broad recovery to pre Covid-19 levels. A more cautious group were contemplating a slower recovery, perhaps more along the lines of a U. Others were thinking in terms of some backing and filling, which might be likened to a W shaped recovery.
More recently, it is becoming probable that we are actually seeing a K shaped recovery, with some individuals and sectors enjoying a V shaped rebound while others are suffering through an inverted V with their circumstances continuing to deteriorate.
By the end of August, manufacturing had demonstrated a sharp recovery, while still not at pre Covid-19 levels, well above the March/April lows. At the same time, the popular stock market indices were at or near all-time highs. In addition, individuals who were able to work from home, were enjoying their previous incomes while incurring lower commuting and other expenses. On the other hand, many service, entertainment and travel industry employees were out of work with mixed, and often delayed, unemployment benefits.
All of this is making it very difficult for investors to parse the best opportunities. As we have suggested previously, a carefully constructed, diverse portfolio of well managed investments may prove to be the best long-term strategy.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA