The COVID-19 vaccine officially began in the United States on Monday, but the Dow Jones Industrial Average rose first and then fell on news of the lockdown, reflecting investor sentiment that the epidemic continues to plague investors. Charlie Munger, warren Buffett’s longtime lieutenant and county vice chairman, said he expects the impact of the epidemic to wear off within a year as the vaccine is widely distributed, but warned that stock returns over the next 10 years will be weaker than those of the past decade because of “playing with fire” and excessive spending.
“It’s amazing,” Munger said in an online conference at the California Institute of Technology on Monday. “I’ve seen polio completely eradicated by the vaccine, and I believe the speed of the distribution of this vaccine is mind-boggling.” That means he is optimistic that the epidemic will pass soon. However, he is clearly much more cautious about the outlook for investment markets, predicting relatively lower equity returns over the next 10 years and describing the current market as “extremely frenzied and the management system, the reward system, is so stupid”. He also cautioned against the massive quantitative easing and rising fiscal deficits of the US in recent years, saying that the situation was “uncharted territory” and that “nobody is printing money for as long as we are without causing trouble and we are very close to playing with fire.”
He added that the retail sector has struggled to make money in the face of the online shopping trend, and the industry has come under further pressure from the epidemic. Another major business in Pakistan, aircraft parts manufacturing, has also been hit hard by the outbreak, requiring a write-off of about $10 billion.
As a matter of fact, with the real economy still struggling to shake off the epidemic, the US stock market has rebounded strongly from the bottom of this year and broken more recently. Many experts and investors have warned that the market is overexcited. In particular, it should be noted that the US new stock market is very cold at the top, which is often the characteristic before the market falls. Among them, the “high price” listing of food delivery platform DoorDash and short-stay accommodation platform Airbnb, which were listed last week, soon fell short of the brokerage’s expectations, with shares dropping 8.57% and 6.64% respectively on Monday. Brokerage Gordon Haskett downgraded Airbnb to an “underperformer,” raising its target price to $103 from $77, but still about 20% below current levels.
As for Cloud software maker Snowflake, which Buffett took a stake in before going public in September, a large chunk of the company will be sold off on Tuesday, with its shares first falling 7 percent on Monday.
At the Fed’s final meeting of the year on Tuesday, Wells Fargo’s head of macro strategy Michael Schumacher sounded a bearish note on the outlook for next year, arguing that a vaccine would significantly boost market confidence and lead to a sharp rise in interest rates. The bank’s basic forecast is for 10-year and 30-year yields to rise to 1.15 per cent and 1.35 per cent respectively by mid-2021, up 23 per cent and 50 per cent from Monday, respectively. Schumacher said that if everything were perfect, including the economy and vaccines, 10-year yields could even rise 1.5 per cent, well above the historic low of 0.318 per cent reached during the outbreak. Once his forecast is correct, it suggests that the Fed will start to feel pressure to raise interest rates next year.