The moment the first stay-at-home orders went into effect, it set off an economic snowball that triggered a recession many are comparing to the Great Depression.
While this is true on the surface, there are some stark differences.
The jobless rate during the Great Depression was over 14%. On May 8, 2020 the Labor Department reported that the unemployment rate soared to 14.7% in April, up from 4.4% in March. This was a leap of more than 10% in just one month. This kind of spike has never happened before—not even during the Great Depression.
When you look at the full stats during the Great Depression, you see that it was a 12-year nightmare with the Bureau of Labor Statistics reporting unemployment reaching 25% in 1933. From 1931 to 1940, the jobless rate never dipped below 14.3% for any one full year. It was over 20% for four straight years—1932 to 1935.
This type of prolonged unemployment won’t be the case this time around—not even for one full year—because the current jump in unemployment was artificially created. It was mandated by government policies that temporarily forced the shutdown of most of the economy. Those businesses did not fail or close their doors permanently because of a crisis of confidence or normal market lack of demand.
These businesses were essentially put on pause, employees shifted to government assistance and should largely return to normal just as rapidly later this same year.
Here’s what I want you to take away from all this: I believe the current recession will be shorter and less damaging than the Great Depression. However, rebuilding after any recession isn’t easy and there will still be pain points.
That said, I expect our economy will regain its footing in about 18 to 24 months unlike the Great Depression that took over 10 years.
Now, what will this recovery look like?
Some Economies Will Come Back Rapidly (“V” Shaped), Others Will Recover More Slowly
Going back to “normal” will certainly depend on where you live. It’s very clear that some states have hardly any coronavirus cases and should open up soon. As a result, some states could have “V” shaped recoveries while other regions will be slow to recover, and the overall economy will look more like a “U” shaped recovery, with a longer bottom-formation.
The economic pressure to reopen the U.S. economy remains intense. It appears that more governors will be easing restrictions sooner than later, especially as state unemployment funds continue to be depleted.
So, what should investors do right now?
As difficult as it might be, do not let fearful headlines influence the decisions you make about your investments. In fact, I strongly urge you to stay disciplined and focus on the fundamentals.
For instance, one of the first things I look at with market corrections and recoveries is volume. Is there a lot of volume and conviction behind the move?
In the first half of May, the indices moved higher, but volume was light. What this indicates to me is that the overall stock market will continue to be narrow and bumpy in the upcoming weeks.
In general, my overall strategy is to focus on stocks with the best outlook for earnings in targeted industries and regions that have a positive growth outlook.
Let Me Introduce Myself
Before I go too much further, I’d like to introduce myself. My name is Louis Navellier and I’m most widely known as an investment adviser and market analyst. For more than three decades, I’ve been publishing my quantitative analysis on growth stocks and I’ve made it my life’s work to continuously refine and develop my analysis for investors like you.
My research and analysis have led to regular appearances on CNBC and Fox Business News and I am frequently quoted by MarketWatch and Bloomberg.
I also manage money for private and institutional accounts through my Private Client Group at my money management company, Navellier & Associates.
At Navellier & Associates, our proprietary quantitative models are designed to balance stocks, ETFs, mutual funds, and income producing investments to maximize returns while controlling risk.
In fact, Navellier & Associates was founded in one of the most significant market corrections of our generation—1987.
It was during this time of fear and market volatility that I launched my firm and doubled down on my commitment to help individual investors no matter what the market threw at us.
In the 30+ years since then, we have guided our clients through every market correction including the summer of 1998, fall of 2002, early 2008, and March 2009.
Our extensive experience with these significant market corrections has resulted in the creation of some incredible custom portfolios that have stood the test of time.
Growth Portfolios: These portfolios feature companies that are committed to growing their sales and earnings. Our growth portfolios are segmented by market capitalization, are actively managed, and seek inefficiently priced growth stocks with opportunities for long-term price appreciation.
Income Portfolios: These offerings provide dividend growth and income opportunities with capital appreciation. At Navellier, our dividend and income portfolios strive for portfolio growth through securities with capital appreciation, strong dividend growth, and income opportunities.
Capital Preservation/Defensive Portfolios: These portfolios aim to outperform up markets and limit losses in declining markets by moving to cash or bonds. This asset allocation plan allows investors to play defense in a declining market.
While it’s true that our portfolios are stringent in their selection criteria and a multitude of investors may invest in them, what we do next in our process is important.
A Custom Portfolio Strategy for You
At Navellier & Associates, we believe that every investor is unique. That's why becoming a part of our Private Client Group starts with a one-on-one professional review of your portfolio. We need to understand your individual risk and goals before we can dive into the process of creating a custom portfolio strategy just for you.
So, if you want to focus on income, but also want a strong defensive position, we can work with you to create that customized portfolio based on your overall goals.
This review is done over the phone…at a time that is convenient to you…to give my associates and me the opportunity to learn about you and listen to your concerns.
