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Video: What Might Recovery Look Like?

It’s important to think about what future stock market recovery might look like and how you could take advantage of it.

Articles by Dan Egan
By Dan Egan Managing Director of Behavioral Finance & Investing, Betterment Published May. 06, 2020
Published May. 06, 2020
3 min read

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Transcript

“Hi everybody, Dan Egan from the Advice and Investing Team at Betterment here. I want to talk to you and think about something that’s been on the back of my mind for a little while now. We’ve been spending a lot of time imagining and thinking about worst-case scenarios and what will happen.

I think that’s good. I think it’s very important to get ahead of all of the bad things because it motivates us to act to actually prevent them from happening. As many people have said, I am very much looking forward to the day when we say, “oh, we overreacted and it wasn’t that bad.” That’s going to be a fantastic day.

And in that vein, I’ve been thinking about and wondering what will a recovery look and feel like? When will that happen, what’s it going to feel like when it comes through?

That’s party motivated because I was doing this and investing through the 2008-2009 crisis. I distinctly remember multiple points in that when we thought it couldn’t get any worse and then it got worse. It seemed to get better almost with nobody noticing it, you know. There’s this sort of common saying that markets take an elevator on the way down and an escalator on the way up.

Definitely, the news is going to report on how bad it is on the way down, but very rarely do they say like, “oh look, we’ve had 4 or 5 % plus days in a row, and that’s actually pretty good.”

I think it’s important to imagine this and spend some time thinking about it, because the stock market usually recovers faster than the real economy. Information and news and money travel faster than the real economy. If you’re thinking about waiting until the economy’s better, it’s probably going to be too late. The stock market is going to recover in advance of the economy recovering.

Let’s think about a few things that I think are going to be really big days and positive news that’s going to come out that’s going to make things seem a little bit better, like we can see the light at the end of the tunnel.

One of them is what we’re already hearing about—fiscal stimulus of various kinds. That’s a fancy word for giving people money. Especially the people that are most negatively affected and at risk because of the financial ramifications of the pandemic.

If we can get money into their hands, that means they’ll have food and shelter. Maybe they’ll be able to go and do work. I think that’s very, very important. The bigger and more impressive those fiscal stimulus programs are, the better off the economy’s going to be coming out of any kind of a recession.

There’s other little stuff which might happen. If the weather gets warmer quicker, it could impede the spread of the virus significantly, that could help us out a lot. If there is some day where they announce that they’ve discovered a vaccine—I know a lot of places are working on this—that’s going to be an incredible day in markets, and one that I absolutely cannot wait for.

They might be able to scale up the medical treatment of some of the other factors that lead towards a high mortality rate. They may be able to scale up the production of ventilators, prevention materials, I’ve heard reports of perfume factories being repurposed to create hand sanitizer.

The idea that humanity is stuck in place is completely wrong. We are going to do things, we are going to adapt and change, in ways that are going to make this dramatically better off. In an funny way, the more extreme of a negative reaction we have now, to prevent it from getting worse, the better off we’re going to be.

I do want you to think ahead to that point, sometime in the future, when you go out to dinner again for the first time and when we’re through this. When we feel like it’s getting better. Just spend some time imagining what that’s going to feel and look like. Thanks.”

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