Lockdown 2.0 Is Coming, Protect Your Gains!

The market is again flirting and in many cases breaking new records daily and it was to be expected because of many factors like pent-up demand, the reopening of the global economy, and the vaccines. All these catalysts were pointers early in the year that the market might take off and reach new highs, and it did. But what is next?

What Changed?

For one, the pro-business, pro-economic reopening voices in the government have been completely silenced. Donald Trump and his allies like Florida Ron DeSantis wanted the country open as early and as safely possible and because Trump wanted it, the mainstream media and political position meanwhile took the opposite side and basically wanted to continue lockdowns as long as possible no matter what the irreparable cost to the economy is. But lockdowns were largely unpopular with voters and the lockdown supporters had to back off as vaccination rates increased and cases fell. But then the Delta Variant arrived on the scene. The Delta Variant of the Covid-19 strain which is supposedly much more infectious but apparently much less deadly than last year’s trusty Covid strain is making its rounds and is creating a whole new crisis to take advantage of. Politicians are racing to increase covid restrictions again, all under the banner of consolidating control, exerting control, and progressing their agenda. There will be renewed talks of stimulus, bailouts, federal unemployment compensation, and above all, a Lockdown 2.0.

One must only look at the US's ridiculous travel proclamations that “re-opening” is not a priority anymore. In June we had the G7 meeting, a meeting that was highly anticipated around the world because Covid put a damper on meetings like those last year. In a G5, G13, or G7 summit world leaders are supposed to get together and discuss things such as trade and travel and make arrangements or deals that can possibly change policy. This year’s G7 was an utter disappointment with no real deals or agreements to talk about, even tho plenty is on the table to discuss, like the damn pipeline that is about to make western Europe dependent on Russian natural gas! Meanwhile, European citizens are not allowed to enter the United States, not for vacation or any other reason. This is not reciprocal; US citizens are allowed to visit the EU. The travel restriction was put into effect by President Biden in January when Covid was much more of an issue and the world was just starting to get vaccinated.

Then things got better. This is evident from the CDC lowering their recommended restrictions and states opening offices and restaurants for full capacity. Even Disney in California went maskless for fully vaccinated and open to out-of-state visitors in June! On the website, Disney says the nation is "turning the corner on the pandemic". The President was very confident about the fact that vaccination rates were soaring and that most adults and people in danger from Covid-19 would be vaccinated by the Summer, and it happened. In August we see that 50% of the US population is vaccinated!

Why Would We Need Another Lockdown?

As I mentioned earlier, politicians will not let a crisis go to waste and the Delta variant is the perfect excuse to dip into the war chest once again for some goodies. Why else would we have not opened the border to legal and revenue-generating tourists after a year of pent-up demand for some beaches and cruises, when things were looking like Covid was beat? Biden met Germany’s Chancellor Angela Merkel at the G7 and the mainstream News in Europe reported that a travel deal is imminent, only to fall silent when the G7 concluded without even mention of it. After growing pressures by the EU government, Merkel came to the US to talk to Biden again personally to lift the travel restrictions for most of Europe but to no avail. It seems Biden just simply said No. The lie that Covid continues to be an issue that requires this kind of measures is being maintained to justify the coming government overeach. The population is led to believe that things are worse than they actually are.

What does that mean for the market?

Well, let’s do some simple reasoning. Without using actual numbers, at the beginning of the year we waited for the reopening, this reopening is still in full effect, July's jobs numbers showed the largest gain in hospital and leisure jobs ever! So, for the market to be at record levels now seems justified, but we must remember one thing. The market is always forward-looking, it will project forward into the unknown future and the near future was looking pretty good once the vaccines started rolling out (under Trump) and covid restrictions were lifted in almost every state. The reopening has not even gotten into its final stages yet with business travel still low, national employee shortages, and global travel restrictions still in place. The reopening is being stopped in its tracks and the market needs to react accordingly. A reversal is imminent if the current attitude in the government prevails.

Get Ready

Every investor should be ready for a drop as vicious as the ones we have seen multiple times last year. We cannot be complacent thinking all that cushy gain from last year will be the norm. IPOs are still flooding the market and are sucking up capital. Good companies have sky-high valuations while mediocre companies fly past them and go straight to the moon! Now is the time to take some profits and behave like there really is another lockdown coming, because there is.

Thanks for reading,

The Punkrock Capitalist