KAR CIO Doug Forman Comments on Nasdaq Tradetalks
To anyone following the stock market today, it’s clear that there is a significant gap between the market’s enthusiastic highs and the current state of the economy, which is — to be blunt — in a recession. So is the stock market delusional, or is there a real reason for this level of optimism?
Kayne Anderson Rudnick Chief Investment Officer Doug Foreman recently joined Jill Malandrino on Nasdaq #TradeTalks to discuss the gap between current market news and the everyday economy.
Foreman pointed out that the Fed and others’ quick implementation of significant fiscal, monetary policies have been very supportive of the markets. For example, Fed policy designed to support the bond market has had a secondary positive impact on the equity markets.
He also noted that the stock market has not moved as a single unit.
“It is a market of stocks, not a stock market,” he commented. At-risk industries like travel, restaurants, and brick-and-mortar retail have been hit hard, while digital businesses that got a boost from the pandemic’s acceleration of business technology implementation have been pulling the overall market up.
One crucial question is how much longer the supportive fiscal policies can prop the market up and when we might have to pay the piper. The day will come, according to Foreman, but not while the recession lasts.
And what does all of this mean for investors? It’s likely that great buying opportunities will be scarce. “Over a trillion dollars of cash is sitting on the sidelines right now,” Foreman remarked. “As everyone tries to put this money to work again, prices will rise, and buyers will have to buy higher.”
“We encouraged our investors to ride it out and stick to their investment plan. Don’t try to time the markets; it’s difficult if not impossible, as the recent market has definitely proven.”