Gaging Economic Sentiment and Our Recovery

Where will the stock market bottoms occur? 

So much news, so many ideals, so much confusion. 

There is a lot going on, but we can be sure of one thing, COVID-19 is a pandemic of grand proportions.

So what does that tell you? 

Recovery is not going to occur easily. 

Especially when the world was shut down from all activity for intermediate months at a time.

Today, we will talk about how the effects of events will have a predominant effect on company performances and market bottoms.

Let’s get started.

Hindsight Conditions

To add to the lockdowns, we received free money! 

Free money (or stimulus payments) were issued so that their bills could be paid. Because one thing we also know for sure, is that the bills don’t stop.

• Outside of the forbearances and moratoriums that is…

So, money was continuously issued and we were still in lockdown. So an effect on spending was well known. The pent-up demand was evident.

Some even thought they couldn’t breath the outdoor air as if the air outside isn’t the same air that enters your house.

Well, that’s a whole another story. But anyway, we received money and couldn’t spend it. 

Then the acknowledgement quickly occurred that unemployment pay, in addition to a stimulus payments, was much more than many made actually working.

So, then comes the total discouragement of returning to work occurs.

So when we did have intermediate reopenings, employers could not fulfill their open roles.

As a byproduct, shelves got emptier or supplies ran low across most (if not all) industries. Then the inevitable; inflation arrives due to low supply and high demand.

Still multiple lockdowns and multiple stimulant payments occur. 

Of course the stock market will go up! 

Where else will people spend their money during or after a lockdown? Especially when housing is short on supply…

Let’s transition to the next topic and review effects on both individuals and companies.

Borrowing

Let’s touch on one small, but vital point that many have seemed to have forgotten – bail outs. 

Many companies received loans to help them stay afloat during this ever so trying time. Of course it wouldn’t be fair if only non-self-employed individuals received stimulus payments and there weren’t programs for the self-employed.

So with this borrowed money, most of it was forgivable. 

More “free money”!

• Well, now were paying that money back and the increase in the fed rate is not done.

As you see, there are so many variables, it is difficult to not go down a rabbit hole of topics. 

The main point is, we have several underlying circumstances that caused inflation, which is mainly supply issues. 

We also have many companies that are currently surviving off borrowed money. Although, many did unfortunately fail.

Let’s stay on course and talk about the possible stock market bottoms.

• So what happens when those companies have more expenses and have undergone less revenue for multiple years?

That’s right. They need a recovery period.

• Next, what happens when the earning estimates, that are usually written a year or possibly two years in advance, happens to fall way off-course and performances suffer?

That’s right. Market sentiment declines and stock prices fall.

• Next, what happens when companies are not well engaged to their performances and don’t alter their performance estimates early enough once they see what COVID-19 is doing to their business? 

That’s right. They prolong the suffering by losing more net worth when stock market investors leave their companies, by selling off their shares due to subpar performances.

Let’s not forget the increased margins on any borrowed funds that were not fixed. Here is another pain point for companies that now face an aftereffect of raised rates.

As you can see, the aftereffects of all the market conditions mentioned previously have an large impact on company performances. 

High engagement, that equates to rapid reactions of updating performance projections, were all very vital.

Otherwise, the suffering, by way of pre-COVID-19 earning estimates, will be the story companies will be forced to stand by.

In several articles that we expressed our sentiment and projections moving forward.

• Real Estate: Inflation, Economy & Sentiment (republished 3/6/22) – “Even now, after 2 years of the first COVID-19 case being recognized, employers and employees are still figuring out fair compensation.”
• The Era of Change & Investing (published 3/29/22) – “The after effect of all that has occurred with labor and stimulus payments, is higher prices for products when demand is high and supply is low. Therefore, inflation has settled in much of the world and is affecting daily lifestyles worldwide.”
• Economic Projections (published 5/24/22) – “It is very important to pay attention to companies that are showing true signs of strength throughout their quarterly reporting’s this year.  
• Economic Change is Here (published 8/23/22) –  “Although many are speaking on the next rate hike not needing to be as high. It could be justified that it should stay high…” 

Conclusion

There is so much day-to-day news talking about how today will affect tomorrow, or the week ahead. 

But, the simple fact of the matter, is that yearly performances have the heaviest affect on market sentiment. To precede the yearly performance results it is important to see performances of historic high earning quarters.

From these two points, the Q2 and Q4 performances are usually the highest earning quarters for sales. 

Being that reopening’s on the state-level began in May of 2021 and continued through September of 2021, it was evident sales would be highly affected for Q2 and Q3.

While also being a slow period of the year for sales, in September and October, it was also evident that after the Q2 reports in Sept/Oct., we would see subpar performances and a change in market sentiments.

Due to the CPI reports, and FED rate raises, one of the market bottoms came early.

As previously mentioned, we still think market bottoms will occur after year-end earning reports and throughout 2023. 

Each quarterly report will weigh heavily on individual company sentiment and this sentiment will show in their stock price change.

Hopefully, earning estimates determined by companies in 2021, were on-par for actuals in 2022.

Be mindful of the possibility of seeing market bottoms, and where and when you will invest in strong companies that are temporarily undergoing challenging times.

Thanks for joining us today faithful readers- future leaders. 

We hope this article has been helpful for you today.

Love ya and continue to strive to exceed expectations.

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