Streetwise for Sunday, July 18, 2021

Each year towards the end of July, I repeat Benjamin Franklin's rather astute comment that while you may delay; time will not. I am also gratified and honored that it has been another year for Streetwise, its 33rd as a nationally distributed column without a single missed week. (If you are keeping count, those years represent 1,861 columns.)

What is so ironical is that the more things change, the more they remain the same. Consider that on Sunday, July 31, 1988, the following prologue appeared in the Trenton Times of Trenton, NJ.

"Today Lauren Rudd begins writing a weekly column about Wall Street for The Trenton Times..."

Space does not permit a full recital, but the following words that began the column back then might once again be considered a prescient commentary on today's market activity.

"The individual investor has been pummeled and is ready to surrender. What with the debacle of last October (Refers to the market crash of October 19, 1987), many are deciding that they have had enough and are leaving Wall Street, an action reminiscent of an audience walking out on a bad play.

After going down in flames that fateful day, individual investors retreated to lick their wounds and to decide what to do next. This left Wall Street worried as well it should. The individual investor has always been its bread and butter. However, these same investors now feel that their trust in Wall Street may have been misplaced and that the game is rigged with the spoils going to the large institutions."

Moreover, with the equity markets at elevated valuations by many measures, you would not be at fault if you were to consider whether what has been conjured up is an impossibly bright future in which economic and corporate results remain robust while inflation and the pandemic remain subdued.

"We're at a 50-year high for equities as a percentage of financial assets, not counting home equity," said Tobias Levkovich, chief United States equity strategist at Citi Research. "We've run too far this year. There's limited upside and, relatively speaking, more significant downside."

Sky-high sentiment has been "helped along by powerful monetary and fiscal stimulus," he said. "That can't be sustained for a long period of time."

With all due respect to Mr. Levkovich, I would unequivocally disagree. Yes, as I have repeated on countless occasions, we will always have periods of benign declines amongst equities. The key exception was 2008, and that was Wall Street's fault entirely.

Nonetheless, corporate earnings are blossoming as the country begins a serious recovery from the COVID-19 pandemic. As I wrote last week, the S&P 500 has not just positive for five quarters in a row. It has gained more than 5% for each of those five quarters. Only twice since 1945 has that index has been able to chalk up a performance of that nature.

For the historians among you, the previous occasion was in 1954, according to Bespoke Investment Group, a time when the Fed was also trying to emerge from a period of ultralow interest rates. While the streak ended, it did not end with a bust.

However, lest we forget, Main Street is not some ethereal concept. Rather, it is encompassing honest people doing honest work - crack-the-bones work; lift-it, chop-it, empty-it; feel-the-flames-up-close work; crawl-down-in-there work - work that someone must do.

Washington would be well served to learn from Main Street about the need to do the things that no one wants to do but that someone must do. Otherwise, we will continually face potential economic destabilization as the Sirens of unfettered deficit spending and rising national debt continue to woo us.

The share of income and wealth going to the so-called "1%" has incensed protesters and agitated economists around the world. Academics such as Thomas Piketty and Gabriel Zucman have pointed out that governments should consider using taxes for redistribution. Such a policy has taken center stage recently. And this is a good thing.

An economy significantly influenced by the wealthy is not without risk. Main Street will fight back to prevent becoming sacrificial lambs to be slaughtered on the altar of fiscal austerity.

Lauren Rudd is a Managing Director with Raymond James & Associates, Inc., member NYSE/SIPC. Contact him at 941-706-3449 or Lauren.Rudd@RaymondJames.com. All opinions are solely those of the author. This material is provided for informational purposes only, is not a recommendation and should not be relied on for investment decisions. Investing involves risk and you may incur a loss regardless of strategy selected. Past performance is no guarantee of future results.