• Christian Armbruester

Holding Pattern



Why the world better get busy living soon.


The markets are in a weird place and have been for a very long time. Lest we forget that the S&P 500 touched 2,200 in our darkest hour in March. Now we stand at around 3,900 and the big question is, which level is correct? The way I see it, we are all in a great holding pattern. All ready and eager to free ourselves from the shackles of the virus, but as yet, still with nowhere to go. What we do know, however, is that once we get out, the world is literally going to explode in a consumption boom the likes of which we may have never seen before.


The spending in restaurants, pubs, shops, and other forms of entertainment will be through the roof when billions of people start to live again. But there is more. Trillions and trillions of Dollars, Euros and Yen have been injected into the economy through monetary and fiscal stimulus that will provide tremendous tail winds for years to come. And more begets more. The more we spend, the better the businesses do, the more people they hire, the more they make, the more they spend, in a virtuous cycle we call the money multiplier effect, and it is amazing.


This is what the markets have priced in. They can look beyond the next six or twelve months, because the value we derive from ownership of all future cash flows is far greater than a delay to getting this little virus under control. The problem is, we also live in the real world and I can’t go to my bank and tell them I will make the next mortgage payment, you know, when Corona is over. Businesses can’t just stop compensating their employees, bills have to be paid, and the whole world cannot afford to hit pause until it gets better.


Governments can only finance the shortfall for so long. Global GDP contracted by more than 5% last year, there are more than 650 million unemployed because of COVID-19, and how much longer can we afford to pay people’s rent? No one thought in March 2020 that come February 2021, we would still be locked down in our homes. Surely, the nightmare scenario would be sitting here in 2022 doing the same thing.


So, what are we to do at this time with our money, our lives and our families? We can’t buy bonds anymore, for no other reason than the yields are too low. Commodities have always been tricky and before you go there, Gold currently costs more than 20% per year to hold because of something called contango. Which leaves property and the stock market, and wouldn’t you know it, both are trading at all-time highs. Other than that, spend as much time with the kids as we can, and for our mental wellbeing, we should stop trying to figure out where the markets are going to go.


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