The Capitalist Investor - Episode 16

In this episode of The Capitalist Investor, Nate Fischer—the Chief Investment Strategist at Strategic Wealth Partners—joins me to hash out: Are we in a bull market or a bear market?

We chat about how our current situation compares to the housing market crash. We also talk about GDP, when we will emerge from this recession, and when the economy and stock market will rebound. Don’t miss this informative episode!

Outline of This Episode

  • [1:56] The definition of a bull market/bear market
  • [3:19] 2nd quarter GDP predictions
  • [6:32] How the economy emerged from the great recession
  • [10:45] Will we see the deepest recession ever?
  • [13:43] How small businesses are being impacted
  • [15:35] Will we surpass this year’s stock market high?
  • [17:15] The uncertainty of the upcoming election
  • [17:50] When will the economy and market be whole again?

Technical definitions of a Bull Market or Bear Market

According to Nate, a bull market is when you break through the prior peak, which in February of this year was 3393. Right now, at around 2800, we are 28% lower than this year’s high, though up from the low of 2191 on March 23rd. We are all still net-negative.

A market correction can be defined as down 10% from top to bottom, and a bear market is a 20% drop.

The media is perpetuating the idea that we are in a new bull market. But when I think about a bull market, I think about looking at my statement and feeling happy. That is NOT the case right now. And we definitely haven’t broken through this year’s previous peak.

So when will the market bottom out? When will we surpass the prior high? Keep listening to hear our thoughts.

The disconnect in the market

Nate points out there is currently a large disconnect in the market. 17 million people have filed for unemployment. The market is projecting a snapback—but the worst isn’t behind us. Nate believes we will likely hit our low again—or hover around it—before the crisis is over. The simple fact is expected earnings are going to be terrible this year.

Our economic data shows things are going to get nasty before they improve. Our 2nd quarter GDP is expected to be negative 30% and that’s IF the economy reopens May 1st. If things are pushed to June 1st, we’ll likely see earnings of negative 60%—and that’s if we jump back in and run at 100% capacity. There is ZERO guarantee that life will get back to 100% normal and a positive prediction of the market seems far-fetched.

The general population will be hesitant to reemerge into the market

A market bounce-back is dependent on 1) people getting back to work and 2) spending money in the economy. But if you look at the great recession, individuals and families emerged more conscious than ever about their spending. They worked extensively to find ways to lower debt—not take on new debt (i.e. expensive purchases such as buying a house).

People have already been trending towards spending less and saving more. Everyone wants to find the best deal and bargain—showing a market shift away from high-end purchases. The Coronavirus pandemic is only going to reinforce that trend, and we don’t see people spending money at the rate needed for a market bounce-back. Especially because now—more than ever—no one feels secure in their jobs.

We are dealing with a healthcare crisis

Nate points out that we weren’t dealing with an economic crisis, but a healthcare crisis that snowballed into an economic crisis. Now, the government is paying to bridge the gap until we can get back to some semblance of normalcy. Nate states,“Until the healthcare equation is solved, the economic situation will remain fragile”.

The average recession cuts earnings 15-20%—but that’s with 80% of the economy still working (such as in the last recession). With the economy grinding to a halt and unemployment rates where they are now, we could be looking at our deepest recession ever.

Small businesses, even if they’re one of the lucky ones who were able to get the Payroll Protection Program (PPP) loan, are still out potential profit. As 50% of the labor force, how will they bounce back from the crisis? Not to mention, no one is talking about the election—which will bring more uncertainty into the market.

Is there any chance we’ll hit out high again in 2020? When will the economy be whole again? What about the stock market? Listen to the end as Nate and I share our thoughts on these topics.

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Show Notes by

Keep Listening to The Capitalist Investor:
Episode 15:
Spending Strategies in a Bear Market, Ep #15
Episode 31:
Handicapping the 2020 Election, Ep #31
Episode 47:
11 Investments in Your Home That Pay Off, Ep #47
Episode 63:
Jeff Bezos and Amazon: Past, Present, and Future Ep #63
Episode 79:
7 Ways Biden Plans to Tax American Families (Part II), Ep #79
Episode 95:
5 Beaten Down Stocks to Buy on the Dip, Ep #95
Episode 111:
Special Episode – Talking Energy with Daniel Turner, Ep. #111
Episode 127:
Retail Earnings Tank & What The Heck is Greenflation? Ep. #127