The coronavirus crash was fast and sharp. It recovered within months – the best recovery when compared to past bear markets.
The speed of the recovery is likely due to the speed and volume of Federal Reserve support, which exceeded all previous monetary stimulus programs.
Some argue that the massive volume of support indicates we are approaching the end game for the credit based system. Others suggest the Fed has learned from previous policy mistakes – namely, underestimating the required magnitude of stimulus. Perhaps if the Fed were more decisive in 2008/2009, the post-GFC recovery wouldn’t have taken so long.
Honestly, there are great arguments either way. I don’t know. But what I do know is the US dollar remains the reserve currency by a wide margin and its status has not been compromised by the recent monetary stimulus. This tells me that the demand for dollars more than makes up for the additional supply.
Some suggest we are in the middle innings of a secular bull market that began around 2014 or so, led by emerging technologies in cloud computing, automation, artificial intelligence and machine learning. Looking at previous market cycles, this is quite possible. In hindsight, we can see that the 2000-2012 period was essentially a sideways market. During that time the S&P 500 price level went nowhere, and it is exceedingly rare that a 12yr consolidation would be followed by another one. It’s more likely a 12yr consolidation would be followed by a secular bull market.
Of course, on a total returns basis the post-2000 experience wasn’t as bad. When including reinvested dividends, the S&P 500 broke even by 2006.
Maybe we’re in a secular bull market. Maybe we’re not. As a dumb and lazy investor I’d rather not try to time the market. Instead, I feel more comfortable, regardless of the market environment, if I own a diversified assortment of businesses that are 1) reasonably valued, 2) will survive the test of time, and 3) reward shareholders with growing dividends and share buybacks.