When the pandemic began, we counseled patience. In our spring Long Run of 2020, we wrote, “We cannot let immediate fear — or the constant drumbeat of bad news during this acute period of crisis — push us into poor decisions or drive us away from the fundamental disciplines that secure our financial foundations.” Today, we are concerned that investor impatience has led many down dark alleys of short-termism and speculative excess.
In March of 2021, the Organization for Economic Cooperation estimated that the U.S. economy would accelerate twice as fast as expected in 2021 as the passage of President Biden’s $1.9 trillion stimulus plan, combined with a rapid vaccine rollout, would ignite a powerful recovery from the pandemic and help lift global growth. This sparked enormous excitement among investors of all stripes and led to strong upward revisions in earnings expectations and global GDP estimates. The CDC’s lifting of some mask mandates in May, and President Biden’s announcement that more open Fourth of July celebrations would begin a “summer of freedom” only increased expectations for a strong and immediate economic reopening — and a return to relative normalcy — by the fall.