Sep 4, 2020 3 min read

Last week, we discussed how the stock market indexes have come roaring back from March lows. This is seemingly a disconnect from economic reality. The indexes are too influenced from six or seven stocks that have taken over their performance numbers.

Between Feb. 19 and Aug. 18, only 38% of stocks in the index have posted gains while 62% have had losses. Some sectors of the economy have done very well, such as consumer staples, health care and information technology. More than 50% of stocks in those areas are up. Other sectors, such as energy and utility stocks, are down in value.

Actually 43 stocks in the Standard & Poor’s 500 saw gains of 25% or more from their March lows. But 126 experienced losses of 25% or more.

Norwegian Cruise Lines is down 71%. AMC Theaters saw some jump in its price this week, when the chain announced it would be opening more theaters soon. While this is good, it will take AMC a long time to get back to pre-COVID operating results. Capacity is being very limited, there are extra cleaning costs, many people will be hesitant to go in for some time, and the company must make up all of the operating losses it has incurred the past seven months.

Many companies have not been paying rent, delaying tax payments and must rehire staff. Hollywood has not been producing movies during the pandemic, so there are not a lot of blockbusters waiting for release. These circumstances are not limited to companies such as AMC, but many in the economy.

It is important to remember we were on an 11-year bull market when the pandemic struck. Price earnings ratios are higher than they have been historically. So we were due for some kind of correction. Low interest rates are making the returns on certificates of deposit and bonds very low. Some of this is driving parts of the stock market higher. The Fed is being very accommodating. Sometime, however, we will have to pay the piper.

There are good signs. We are in much better shape in the country than in March. Housing is selling. Some people have increased their savings. Yet others are struggling because of job losses or bad financial habits. Elected officials must balance science with economics. Fortunately, emergency rooms are not being overrun, which was the reason for the economic shutdown.

When things become more normal, it will take a lot of time to make up losses and be in the same financial shape as before the pandemic. Anyone who has struggled financially in their personal lives knows it is often a rough road back to financial stability.

The good news is the country, like people, can make it if we make good decisions and put in the work. We have many strong people who will get the job done. Just make smart financial decisions for your family.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.