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Is This Time Different?

By Andrew Willms, President & CEO


It’s often said that the four most dangerous words in investing are “this time is different.” Although I’ve long agreed with that sentiment, 2020 appears determined to make long-lasting changes to the markets and the economy.


As Ben Carlson points out in a blog post you can find here, there have been a large number of firsts already this year, including:


· We saw the fastest stock market sell-off and bounce back in history.

· Mega cap tech stocks are dominating the major indexes as never before.

· Mortgage rates are at record lows.

· Gold has hit new all-time highs.

· Interest rates are at record lows and long-term government bonds are up more than 30%.

· The federal government has invested trillions of dollars to stimulate the economy and combat the coronavirus, resulting in record-smashing deficits.

· Working from home and ecommerce have grown exponentially.

· A tech-stock day-trading boom has emerged in the midst of an economic/pandemic crisis.


While some of these historic occurrences are clearly tied to the Covid-19 pandemic, more permanent forces may also be at work here as well. Ben suggests that technological advances that make trading cheaper and easier are a major factor. The near instantaneous sharing of market-moving information, the 50% decline in the number publicly-traded U.S. companies, and the increased willingness of governments to intervene in (formerly?) free markets also have the potential to impact how the stock market behaves for years to come.


Whatever the cause or causes, investors should take note that the stock market’s future performance could look a great deal different from its past. As a result, while history may well remain our greatest teacher, it’s important to recognize that when it comes to investing, history’s lessons may be less applicable going forward.


Recommended Reading:

Now is the right time to hedge against unexpected inflation Five midyear questions for disappointed investors Why most people are so bad at stock-picking

Something just for fun:

The 20 best Italian beef sandwiches in Chicagoland, ranked.


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