by Gary Alexander

September 15, 2020

Today marks the six month anniversary of the coronavirus lockdown – plus the 12-year anniversary of the “Lehman moment” (September 15, 2008), when the Great Recession began, and the 19th anniversary of post-9/11 market crash – the three 21st century crises that hit America, hitting New York the hardest.

A Bar Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

It took longer for the stock market to recover after the 2008-09 crash, but we reached the previous highs by February 2013 and went on to set a record for the longest bull market – reaching 11 years this year.

FRED DJIA 2000-2014

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

As for 2020, “Beware the Ides of March” is a warning that goes back to the times of Julius Caesar, and he was indeed murdered March 15, 44 B.C. This year, March 15 was supposed to be “Selection Sunday” for the NCAA Basketball Tournament in March Madness, but the corona virus had another madness planned.

That Sunday, March 15, the Federal Reserve held an emergency meeting and reduced their key short-term interest rate by a full 100 basis points from 1.0% down to zero, and pledged to buy at least $700 billion in government and mortgage-related bonds as part of a wide-ranging emergency action to protect the U.S. economy, but it didn’t work. The Dow fell a record 3,000 points the next day, and the VIX (volatility index) hit an all-time peak of 82.69 on Monday, March 16, 2020, eclipsing its previous record of 79.13 from 2008. Later that week, various states began locking down their major industries and Congress passed its $2.2 trillion Coronavirus Aid Relief and Economic Security (CARES) act for financial relief.

Overall, the Atlanta GDPNow model now shows a third-quarter GDP annualized growth rate over 30%, which would represent an all-time record rise after the worst quarterly decline in the second quarter.

FED of Atlanta GDP Estimate for 2020

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

We’re now exactly six months into this crisis and the stock market has come all the way back, and the economy is recovering rapidly, but we’ve suffered major damage. All three of these major 21st Century crises cost a huge market downdraft in the beginning and trillions of dollars in accrued government debt.

The debt from 9/11 came via the costs of endless wars in Afghanistan and Iraq. The 2008-09 crises cost trillion-dollar deficits every year in President Obama’s first term, and this coronavirus has cost at least $3 trillion in deficit spending for relief checks and support for states, health care, and targeted businesses.

During the coronavirus shutdown, Americans squirreled up a lot of cash – reaching $6.4 trillion in April. A lot of that money flowed into stocks and other financial assets since then. While that nest egg is cut in half to $3.2 trillion now, it’s still well above the previous $1.1 trillion, so we still have plenty of cash.

Line Graph with Personal Savings Value

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Much of that $6.4 billion in savings went into the stock market, pushing the capitalization of the Wilshire 5000 up $12.5 trillion since March 23 (through September 4). The economic indicators seem to point to a V-shaped recovery, but there is also risk of a K-shaped recovery that favors well-off knowledge workers but leaves behind many in the lower rungs of the service economy, who have suffered the most this year.

As with the previous crisis, New York was hit hardest: “Only” about 2,500 died in the Twin Towers on 9/11 but 50,000 natives of New York and New Jersey have been felled by coronavirus so far, 25% of all COVID deaths for only 12.5% of America’s population – and also a higher concentration of the jobless.

Not all those suffering are poor. As a long-time jazz DJ, I’m in touch with several New York musicians who are top-rated in their instrument by both fans and critics but are suffering in their “gig” economy (the word “gig” was born in jazz argot.) They live off Broadway show income, club dates, recording sessions, teaching, touring or studio sessions, all of which are gone until mid-2021. Some top recording artists are in danger of losing their homes, in deep arrears for rent. I’m trying to help drum up support, but maybe some of those with deep pockets can find and help those in need make it through tough times like these.

A New Look at the “Roaring ‘20s” in American History – All Four of Them

I have already written much about 1920’s problems and the subsequent Roaring 20s as a hopeful example of how today’s dark days can become a prelude to a historically strong economic and market bonanza. The 1920s gave us a wide array of new technologies: Radios grew from a high-tech hobby to commonplace companion – same with cars, starting with hundreds of bold brands. Silent movies flourished, then began to talk. Jazz music was born, but there were also practical appliances: The Frigidaire replaced the icebox.

But now let me survey to the 1820s, 1720s, and America’s birth in 1620 for some other Roaring ‘20s:

The 1820s were dominated by the building of the Erie Canal and the emergence of a powerful new tool for transporting goods and people – the railroad. First came the Erie Canal, which ran 363 miles, dropping 555 feet through 83 locks. It was 40 feet wide, four feet deep, and dug entirely by hand. It was like a “moon shot” that everyone thought would take decades to build, but New York Governor DeWitt Clinton sounded like JFK when he said, “The day will come in less than 10 years when we will see Erie water flowing into the Hudson.” The canal opened in 1825. His boosterism caused a mania in canal securities, which put the young NYSE on the map, but soon after the canal turned a profit, the New York legislature granted a charter to the Great Erie Railroad to run a 483-mile line from the Hudson River to Lake Erie.

Erie Canal Path

By the 1890s, railroads dominated (over 60%) the New York Stock Exchange’s total capitalization.

1720 was the peak year of the “Mississippi Bubble” in European markets, but it was based on a very real land deal centered around the new metropolis of New Orleans, founded in 1718 and named after the Duke of Orleans, the Regent of France, who allowed renegade Scottish economist John Law free reign to create a scheme for over-subscribing New World land claims to generate population in and around New Orleans. The French had high hopes to be the reigning European power in America, intending the port of New Orleans to be their entrée to the riches up river, but Law’s bubble burst in May and by the end of 1720 Law had to sneak out of France by night, leaving behind his 21 luxury-filled chateaux.

Mississippi Company Shares

September 16, 1620 could be called America’s second birth, after Jamestown in 1607: 400 years ago, 102 English settlers set sail from Plymouth, England, in the Mayflower, including 35 religious dissenters, 67 other settlers, and a crew of 25. After 57 days at sea, 41 family heads met off Cape Cod and drafted the Mayflower Compact, which established a democratic Bay colony to operate under “just and equal laws.”

Renditions of Mayflower Conpact

Within decades, Pilgrims and Puritans formed the core of abolitionist rhetoric that eventually freed the slaves. I say this because much has been made of the arrival of the first slaves to Virginia in 1619. The New York Times has made slavery the central moment in American history through their “1619 Project,” now taught in many schools.  With schools now teaching via Internet, let me make a modest proposal that we add a valuable counterweight: “The 1620 Project.” The story of America is one of growing into truth, a battle of conflicting ideas, with better ideas constantly replacing outdated ideas. In history, our “1620 Project” (just laws) defeated the “1619 Project,” costing over 600,000 lives in a Civil War and a century of legal battles. Teach all of American history, from all angles, not just the negative worst-case scenario.

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Sector Spotlight by Jason Bodner
Common Misconceptions about Today’s Market

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About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

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