1: The end of the pandemic?
While the Omicron version of Covid-19 is spreading rapidly around the world, the chart below shows that deaths are not spiking. Of course, this doesn’t capture the full picture of hospitalizations, complications, etc. but it does serve as a broad proxy for the severity of this variant (I’m not a doctor). Since day 1 we’ve been told that pandemics end when they evolve to become more transmissible but less lethal. Perhaps there is light at the end of the tunnel?
2: Personal savings rates drop
Personal savings rates as a proportion of disposable income, fell from a high of 34% on April 30th, 2020 to 6.9%. The panic over the unknown has subsided. This coupled with inflation concerns is pushing people to re-think their cash hoards.
3: Investors should always second-guess their emotions
The chart below is a useful tool for mapping investor emotions against the market cycle. Simply put, people are most enthusiastic about investing AFTER the market has experienced a significant run and is closer to a peak.
In my experience, the best time to get bullish is when many people are saying a recovery isn’t real (aka calling it a sucker’s rally). Also, I have had good luck avoiding market shocks because there were clear dislocations and warning signs that many disregarded until too late (2008, 2020). However, I have yet to fully participate in a slow grinding bear market like the one that occurred after the tech bubble. During the tech bubble, I had money in the market but it was very little and I was just starting out. Regardless, my preference is to do nothing. Portfolios are like a bar of soap - the more you handle it, the smaller it gets.