With U.S. Federal Reserve Chairman Jerome Powell announcing that the full range of tools are ready to be used to combat this recession, investors seem to be somewhat placated, as stock prices have continued to move slowly higher as broad market sentiment appears to be improving.
As with the previous financial crisis, central bank stimulus seems to be the right catalyst investors hope will calm the nerves of traders and investors and bring us back to another decade-long bull market via a V-shaped recovery.
That said, the fundamentals of our global economy coming out of this pandemic do not look good at present. Extremely high unemployment levels and high levels of bankruptcies of small and medium sized enterprises (SMEs) are not likely to bode well for the broad recovery, despite progress in technology stocks and other large-cap blue-chip stocks that are likely to continue to outperform regardless of poor performance across most small cap stocks.
The push-and-pull relationship with central banks attempting to keep economies on life support while the overall economy, which is built on SMEs, continues to feel the pain of this pandemic, makes for choppy waters on the horizon, in my view.
I would encourage all investors to take a long-term view on investing and focus on companies that are likely to succeed over the coming decades rather than focusing too much on the near-term volatility that will come out of this pandemic recovery.
Invest wisely, my friends.
