Have We Just Delayed the Inevitable?
Two things on Market Vizion today. Have we just delayed the inevitable, or are things maybe not quite as bad as we thought?
Did We Just Delay the Inevitable?
So let's talk about have we just delayed the inevitable? What we're seeing is bank stocks are trading at relatively low multiples, relative to historic valuations.
That also means they don't make up a large percentage of the overall market, which is good because if we do get volatility economically speaking, because of deferred payments or defaults on mortgages and bank loans, the banks stock prices shouldn't be as hard hit or shouldn't be as volatile as they might otherwise be.
The other issue we're seeing, in terms of the inevitable, is banks are sandbagging their earnings. Banks have sandbagged their earnings and set aside reserves for bad debt potentially to come at a rate that we haven't seen since the fourth quarter of 2008.
That's actually really good because that means the banks are preparing for potential defaults ahead of time, and when they can get out ahead of that and prepare for that, that bodes well for stability of the banks. That's what we need them to be doing.
Federal regulators are also coming in and stopping things like stock buybacks, dividend increases, and a number of other risk mitigating factors for the big banks our economic system.
Are Things Better Than We Thought?
On the other side, are things not quite as bad as we thought or hoped?
Well, we thought we were going to get to 30% unemployment. We only got to about 13.3, and then we seem to have hit bottom and started bouncing back really robustly here in the end of the second quarter and going into the third quarter.
The other thing I'd point out is that retail sales have been very robustly bouncing back. GDP growth has been very robustly bouncing back. So we think the worst of the economic numbers are probably behind us. Certainly be safe out there, be responsible, wear a mask where it's policy, and stay healthy.
If we can help you here at Vizionary Wealth management, don't hesitate to reach out. We're always here with perspective for the decisions ahead, have a great July.