Do you remember “stutter songs”?
David Bowie. Photo: Adam Bielawski. Source: Wikimedia. CC BY-SA 3.0
Stutter songs were all the rage in the ‘70s. There were some big hits: Barbara Ann by the Beach Boys; My Generation by The Who, My Sharona by The Knack. But one of the most significant – at least in my memory – was Changes by David Bowie (aka “Ziggy Stardust”). Maybe it was because it hit the charts when so many things were changing in our world. This was, after all, the early ‘70s. Maybe I associate it with my early teens, a time of great personal change. In any case, the song is considered one of Bowie’s best, sometimes regarded as his manifesto, embodying his ever-evolving artistic and personal style.
It’s important to manage changes – changes in our lives, changes in our government, changes in the markets. One of the reasons hereditary monarchy was so common in ancient societies is because it made the rules of succession so clear. Kings just followed one another down the family line. Medieval leaders weren’t stupid. They knew that they would have to put up with any number of crazy or knuckle-headed kings. But they also knew that violent transitions from one ruler to the next would be worse.
Medieval Coat of Arms. Illustration: Sodacan. Source: Wikimedia. CC BY-SA 4.0
The peaceful and orderly transition of power is something that sets the United States apart. One of the reasons that our economy has grown to be the richest in the world is because we began this process over 200 years ago, with the election of Thomas Jefferson to succeed John Adams. His inauguration in 1801 was something truly unique in world history: an elected leader representing a radically different political viewpoint acceding to power without bloodshed or reprisals. A lot of credit goes to the one-term president who preceded him, John Adams. He understood the significance of the moment – for the emerging nation and for the history of the world.
Gilbert Stuart’s portrait of John Adams, 1823. Source: Boston Museum of Fine Arts
Managing change is important in our finances, as well. The markets are always evolving, incorporating new developments in the economy, in our personal behaviors, in technology, and in society. The biggest change in 2020 was the Coronavirus pandemic; the biggest change in 2021 will be the rollout of the vaccine. Our new President, Joe Biden, has promised to vaccinate 100 million people in the first 100 days of his Administration. If that happens, it’s likely that the Coronavirus pandemic will be over by the third quarter of this year, at least in the US.
If that happens, consumers will be able to spend some of the massive savings that they’ve accumulated over the course of the past year.
Source: St. Louis Fed.
By some estimates, consumers have over $900 billion in excess savings. When the economy opens back up, people will have a lot of lost consumption to make up. If there’s one thing the American consumer is good at, it’s shopping!
The markets, of course, have anticipated all of this. That’s why gasoline prices have ticked up in the last couple of months. That’s why stocks associated with the economic reopening have done so well lately: airlines, restaurants, hotels, cruise ships. But when the surge has passed, what will we go back to? Bowie’s lyrics may offer a clue:
I watch the ripples change their size
But never leave the stream.
Form impermanence
So the days float through my eyes,
But still the days seem the same.
And these children that you spit on
As they try to change their worlds,
They’re immune to your consultations
They’re quite aware what they’re going through.
The most dramatic changes of 2020 – our accelerating digital economy; the growth of nationalistic populism everywhere, not just the US; the ongoing “graying” of our populations – are really the continuation of trends that were well in place before Covid-19 hit. These trends are “immune to our consultations.” It’s critical for us to be aware of them, prepare for them, and not be surprised by the changes they continue to bring to our lives.
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