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Gimme Shelter: Notes from the Schwab Conference

The overwhelming harm caused by the pandemic and the seemingly endless, hyper-partisan election season has led us to desire calm. So it's understandable that for Liz Ann Sonders, Chief Investment Strategist at Schwab, the present situation evokes The Rolling Stone's "Gimme Shelter." The following notes from the annual Schwab conference, which took place virtually last week, will hopefully provide some insight, if not calm.

 We Always Live in Uncertain Times

We often view life as having a greater sense of predictability than it does. According to Arthur Brooks (Harvard professor) and Simon Sinek (author), extraordinary, "once-in-a-lifetime" events occur more often than we may realize -- the fall of the Soviet Union, September 11th, and the Great Recession are but a few of the more recent examples.

We hate disequilibrium. We want things to hum along smoothly. Deviations from the status quo upset us.

While difficult, we should try to accept uncertainty and change as part of life. Brooks and Sinek suggested that we acknowledge our fear of the unknown and appreciate the present. No small task.

Uncertainty Encompasses the Stock Market

We have no clarity with respect to the important factors that currently influence the market -- the timing and efficacy of a vaccine, the results and impact of the election, and the fiscal and monetary policy that may, or may not, be implemented. The recent volatility in the market reflects this lack of certainty. This doesn't mean you should bail out. You should, however, expect that volatility may be high for a while.

I found a comment by Will Page (economist; Spotify executive) particularly interesting. He noted how it can be difficult to assess the impact that new technologies have on traditional economic metrics such as the Gross Domestic Product. For example, what does Zoom add to the GDP? It's less straightforward than measuring the contribution of a car made by Ford.

The Pandemic has Exacerbated Inequality

Former Secretary of State Condoleezza Rice pointed out that knowledge-based workers have suffered far less dislocation than employees who must show up to work at places like restaurants and hotels. Many of these service businesses are closed or have scaled back significantly. The economic burden is not being shared equally; not everyone can work from home.

The Long-Term Impact of COVID-19 is Unknown

Even with asymptomatic patients, the long-term effects on those who have had the virus are unknown, according to Dr. David Agus, professor of medicine at USC. Nor is there any certainty as to how long those who have recovered will have immunity. One thing is known: masks work. The good news is that Dr. Agus believes treatments are improving and that progress is being made on a vaccine.

It's not Obvious

We all have our predictions about the outcome of the election and how it will affect the economy and the stock market. Expert opinions vary widely. All of this will only truly be known in hindsight.

Musical Treat

For those of you who wish to indulge your cynicism, here is Richie Haven's version of The Who's "Won't Get Fooled Again."