The question of whether stimulus is really needed in today’s economy, given the rapid recovery stock prices have seen in recent months, is a good question to ask.
After all, if stock markets, and the global economy for that matter, are unable to function without significant government stimulus, one must be worried about the structural issues underpinning our financial markets and how sustainable this coming economic recovery will be.
Of course, we are currently in the midst of the worst pandemic in a century. The word “unprecedented” has been used an unprecedented number of times. The level of extreme uncertainty we all face is understandable, and the stimulus measures enacted by central banks all around the world have largely been viewed as necessary by most economists and experts.
Stimulus as largely become viewed a recovery insurance. Going without stimulus could certainly turn out okay, however the potential downside of not going for enough with stimulus is much higher than the upside that comes with fiscal conservatism, so caution has been thrown to the wind.
Stimulus is likely here to stay, so I’d encourage investors to stay focused on what this means for their portfolio holdings. For example, I’d recommend looking at companies offering meaningful and sustainable (and preferably growing) dividends well in excess of bond rates which are near zero.
Stocks that benefit from stimulus are likely to continue to do so making this yet another factor investors should plug into their models today.
Invest wisely, my friends.
