Quote of the Week
“Adversity is the path to truth.” – Lord Byron
Last week the markets were down about two percent. Then yesterday (Monday), the markets were up over 7% depending on the Index. Today the markets started strong and then sold off at the end of the day to finish slightly negative.
Yesterday’s rally looks very much like a “bear market” rally. Bear market rallies tend to be strong, short, and intense. We have already had six or seven since the big decline started in February. You can expect more to follow. As the rubber band gets stretched to the downside, any bit of good news will cause it to contract back to the upside. Remember, the overall economic conditions will rule the long-term trend.
I have been asked recently about how long this will last. My opinion is that it will last until we get a vaccine or a way to mitigate the seriousness of the virus. Even if we do find a drug to make the virus less severe and most people are able to recover, a lot of people who have elevated risk factors still won’t venture out because the risk is too high that they will be the ones to lose the gamble.
The labor market is the key to a recovery back to normal. The recovery of the labor market tends to trail the recovery in the stock market. The stock market bottomed in March 2009 of the Great Recession of 2008-2009. It took until February of 2010 for the labor market to bottom and started back up. Over the course of the subsequent 113 months, the labor market added a cumulative 22.85 million jobs. In the last two weeks, roughly 47% of the total gain has been wiped out.
If we proceed at anywhere near the current pace of Initial Claims, the gains of the entire expansion will be wiped out in a matter of weeks. Even if the Initial Claims rate decays to something like 500K-1Million per week as we move through April, 60-70% of the cumulative labor market gains during the expansion will have been lost by the time we get the April/May Non-Farm Unemployment Payroll releases.
While the speed and scale of stimulus initiatives have been unprecedented and, unlike the Great Recession, which started before bankruptcies and large-scale dislocations really began to manifest, the notion that we won’t experience a medium to longer-term depressive effect seems willfully naive.
I hope that the recovery is fast and furious, but right now, the effervescent hope of a “V” shaped recovery is not a high probability scenario.
The deadline for having a Real ID for travel has been pushed back to October 1, 2021, thanks to COVID-19. I am sure that few of us are in the mood to fly right now, but once this COVID craziness moves on, I’ll be ready to see my grandkids overseas. The following is the update regarding REAL ID.
Flying with a REAL ID
REAL ID deadline extended.
Due to circumstances resulting from the COVID-19 pandemic and the national emergency declaration, the Department of Homeland Security is extending the REAL ID enforcement deadline by a year. The new deadline for REAL ID enforcement is October 1, 2021. Read the announcement.
Beginning October 1, 2021, every air traveler 18 years of age and older will need a REAL ID-compliant driver’s license, state-issued enhanced driver’s license, or another acceptable form of ID to fly within the United States.
Check for the star.
REAL ID-compliant cards are marked with a star at the top of the card. If you’re not sure, contact your state driver’s license agency on how to obtain a REAL ID compliant card.
For information by state, including where to obtain a REAL ID, visit the DHS REAL ID website and click your state on the map.
Note: Legacy Ohio driver’s licenses have a gold star marking on the card, however REAL ID compliant Ohio driver’s licenses have a black cut-out star. If you are not sure whether your card is compliant, contact the Ohio driver’s license issuing agency.
About enhanced driver’s licenses.
Michigan, Vermont, Minnesota, and New York states issue REAL ID and state-issued enhanced driver’s licenses, both of which are acceptable. Washington state issues enhanced driver’s licenses only.
State-issued enhanced driver’s licenses are marked with a flag. These documents will be accepted at the airport security checkpoint when the REAL ID enforcement goes into effect.
It’s the law.
Passed by Congress in 2005, the REAL ID Act enacted the 9/11 Commission’s recommendation that the federal government “set standards for the issuance of sources of identification, such as driver’s licenses.” The Act and implementing regulations establish minimum security standards for state-issued driver’s licenses and identification cards and prohibit federal agencies, like TSA, from accepting licenses and identification cards from states that do not meet these standards for official purposes, such as getting through the airport security checkpoint to board a plane. Learn more about REAL ID enforcement.
“Flying with a REAL ID.” Transportation Security Administration, https://www.tsa.gov/real-id Accessed 04-07-2020
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These are the opinions of Larry Lof and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.
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