June 10, 2020 Update: Green Shoots and Signs of Economic Life
It’s perhaps the understatement of the year, but there’s been a lot going on in 2020. An election year, a global pandemic, and now, protests. It feels like we’re living a decade’s worth of change in just one year. Plus, everything moved so fast. These lightning-fast changes also impacted the markets, which I believe are starting to show signs of new life.
This is not the first election, pandemic, or social unrest we’ve experienced in most of our lifetimes. Yet, it is the first “social media” dominated version of each. News and narratives travel in real time. They land straight into those high-tech devices we all carry. It’s hard to catch a breath between one eye-catching post and another.
Just as the news spread faster, so, too, the markets moved faster than we’ve ever experienced before. In March, the Dow Jones Industrial Average was down ten percent one day, then up nine percent the next.1 History may show that the entire bear market lasted about 32 days, from mid-February to mid-March. Then the market turned on a dime, roared upward, and hasn’t looked back.2 The rapidity of the decline and the ensuing turnaround has been astounding.
Also astounding were the breadth and depth of the near-total economic shutdown, as mandated by politicians and health officials across the country. Because our otherwise healthy economy was brought to a screeching halt, economic growth will likely return. Unlike the market, it won’t happen overnight. We’ll need patience in the days, weeks, months, and quarters ahead. And, it probably won’t be a smooth ride. We should expect some volatility—there usually is. If things keep improving, it will likely be volatility within an upward trend.
Things are starting to get a little better, bit by bit. We’re seeing green shoots—or signs of economic life—popping up. Given the right conditions, green shoots grow. And from where I sit, it seems that conditions for the economy are favorable for this new growth.
Talk with us about the green shoots that might be growing in your backyard. We’re here to help.
1 On March 12, 2020, the Dow Jones Industrial Average (DJIA) dropped 9.99%. The following day, the DJIA rose 9.36%. Source: HearthStone research using data from Yahoo Finance.
The Dow Jones Industrial Average (DJIA), is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States. Although it is one of the most commonly followed equity indices, additional data on the overall U.S. stock market can be found using broader market indices such as the S&P 500 Index or Russell 3000. The DJIA is not weighted by market capitalization and does not use a weighted arithmetic mean.
2 A bear market is generally defined as a decline equal to or greater than 20%. This occurred between February 20, 2020 and March 23, 2020 when the Dow Jones Industrial Average (DJIA) declined about 37%. Since then, the DJIA is up about 46% as of June 5, 2020. Source: HearthStone research using data from Yahoo Finance.