The Impact of Covid on the Economy and the Stock Market


September marked the end of stimulus payments and a frustrating increase in Covid cases in the U.S.

Covid statistics in the U.S. have lately shown a frustrating rebound. Total infections are running at about two-thirds the previous peak, with total deaths about half their previous peak.

Overall, the curve appears to have leveled off since late August. Some public health officials have predicted that Covid will continue to recede, and climb, and recede in a series of progressively weaker echo waves. This could prove to be the crest of a significant wave.

Probably owing to the recent Covid rebound and the exhaustion of stimulus checks, August’s employment report was a dud. Only 235,000 jobs were added, far short of estimates. The worst-performing industry was retail trade. The unemployment rate declined by 0.2% to 5.2%, but labor force participation was flat at 61.7% and remains more than 1% below its pre-Covid equilibrium. This is a huge gap, and we note those missing participants are not included in the unemployment numbers quoted above.

It will be interesting to see whether the return of in-person schooling allows more parents to reenter the workforce, as virtual schooling was often blamed for the high rate of labor force dropouts.

What is an investor to do? Try to pay fair prices for assets that can more than keep up with inflation. Stocks have historically been a good inflation hedge. Many valuations look stretched, and stock prices could be doubly harmed by higher taxes along with lower multiples paid for the subsequent reduced earnings.

Nonetheless we are finding stock opportunities for Investor Advisory Service subscribers in this and recent issues where it appears other investors are already accounting for these risks.

Reprinted from the October 2021 issue of the Investor Advisory Service. For more information, to download a sample issue, or to subscribe to the best investing newsletter in the U.S., visit Investor Advisory Service.