Banknotes

The economic reopening is finally underway in earnest! Restaurants, movie theaters, hotels, airports, and malls are all busier than they've been in more than a year. The number of vaccinated individuals is reaching staggering levels and has led to a dramatic decline in infections, hospitalizations, and deaths.

All of this has led to far fewer restrictions on individuals and businesses (by the time you read this, all, or at least most, governmental restrictions in Dane County will have been lifted) and the results are awesome. But – yes, there had to be a “but,” didn’t there? – all this activity, combined with the unprecedented amounts of fiscal stimulus being pushed into the economy, could lead to trouble.

The only constant in life is change. Never has that been more true than today. At the start of 2020, the economy was strong and growing, the markets were heading ever higher, and masks were nowhere to be seen except on Halloween. But seemingly in an instant, things changed – and continue to do so. First, decidedly for the worst, but increasingly of late, for the better.

Sometimes, things can appear to be right in front of us, yet when we reach out to touch them, they remain just beyond our grasp. Such is the case with the economy, at present: It's opening up – Madisonians need only drive the Beltline in the morning or evening to attest to the fact that traffic has increased, a result of workers returning to their offices – but GDP has some way to go to make up all that was lost.

In keeping with last month’s Disney-movie-themed post, this past month's economic performance can be likened to another of the studio's timeless classics: Beauty and the Beast. As I'm sure you're familiar, the tale is about a beautiful young lady (in this case, herd immunity from coronavirus) who falls in love with a beast (we'll discuss what this may be in a moment) that is actually a haughty, but dashing, prince who's had a curse placed upon him – one that's lifted by her devotion. Too much of a reach? Well, read on and decide.

The beast, I would argue, comes in the form of economic stimulus. While some may help those that need it, too much could lead to inflation and market turmoil. We want our tale to end with a celebration, rather than a disaster, but no matter the circumstance, we want to be able to navigate the markets safely and appropriately. 

One of my favorite Disney movies is Robin Hood, and not just because it's the timeless tale of taking from the rich (who stole it in the first place) to help the poor, nor because it's arguably the funniest of Disney’s older movies. The real reason I love it so much is because one of the scenes is played out with On Wisconsin playing over the action! Who knew our favorite college fight song had made it into a Disney movie? Anyway, mention the name Robin Hood these days, and most everyone will assume you're talking about the financial services company, Robinhood.

There is a scene in one of the Back to the Future movies where Marty McFly is caught in a tunnel on his hoverboard, with his arch-nemesis, Biff, bearing down on him in a convertible. The intensity builds as the audience wonders whether Marty will make it out or get run over (spoiler alert: he makes it out). In a way, our economy is a bit like Marty right now – will it get run over, reach daylight, or perhaps make it out of the tunnel, but not in the way we all hope?

New beginnings can be fun. Think of getting married, having a baby, starting a new job, or moving into a new home – all very exciting times to celebrate. Perhaps we're now approaching another: the recent news concerning coronavirus vaccines is highly positive and could signal the beginning of the end of the virus as a dominant force in our lives. Yes, the road to normalcy is still a long one, but these developments offer a glimmer of hope heading into the New Year, and for that, we should celebrate – the markets certainly have been!

The election is finally over (we think)! We survived! And while I promise to (mostly) attempt to steer clear of politics here, the results of the election do have consequences for the markets and the economy. It appears that the government will remain divided, which will likely mean fewer surprises when it comes to policy. So, the 2020 beat goes on…now to vanquish the virus and get back to normal – new or not!

Have you ever felt like you were being pulled in different directions? That's how many feel today: Do we go out or stay in? Do we spend or not? Will stocks rise or fall? Will the economy continue to recover or collapse? Very good questions, all.

Looming over everything, of course, is the virus, but there are also various ramifications regarding election outcomes to add to the mix. Perhaps the only thing that is certain is, at this point, uncertainty, and that means, at least in investment terms, more volatility on the horizon. When competing data points cause competing outlooks, can those outlooks become self-fulfilling prophecies?

In today's economic landscape, investors are being pulled in a number of different directions – large-cap stocks vs. small- or mid-caps, domestic vs. international, stocks vs. bonds, traditional investments vs. less traditional ones. These choices can be further complicated by conflicting economic data, much of which can be spun to suit any particular agenda. With all of this to contend with, how do you make decisions on how and where to invest?

Like dieting or dealing with the virus, a solid approach begins with common sense. Eating less and exercising has always been the best method for losing weight; likewise, taking reasonable precautions is critical to staying healthy during this pandemic. The same principles hold true when it comes to investing: Setting reasonable goals, taking action, and sticking to the plan generally works best, without letting all the economic noise get in the way. Here, we'll take a quick look at some of the economic data, and try to make sense of it.