1/12 Many argue there is a disconnect between the market and the economy. There is not. Here is why.

2/12 Yes, the SP 500 is only down about 14% this year and unemployment is very high, but note several things. First, the market looks forward. It is predicting things could get better rather than much worse. Second - and more importantly - THE S&P 500 IS NOT ‘THE MARKET’.

3/12 The S&P 500 is about 505 stocks that are all large stocks and all U.S. stocks. These behave very differently than other parts of the market.

4/12 Large U.S. stocks benefit from the fact that big companies are often the beneficiaries of small companies struggling or going out of business.

5/12 Where will the people that used to go to your local restaurants go if they fail? I’ll tell you where: Chipotle, McDonalds and large national publicly traded chains.

6/12 Where will the people that used to go to local retail stores that were just hanging on now go? I’ll tell you where: Costco, Wal-Matt and Amazon.

7/12 So let’s look at other parts of the market:
Small U.S. stocks down 23%
Developed International stocks down 21%
Small internarional down 22%
Current conditions hurt small and overseas companies far harder than big U.S. companies. The market gets that.

8/12 Let’s look at some sectors under duress, and for good reason:
Airlines down 63%
Hotels down 50%
Movies theatres down 50%
The market gets some of these may make it, some won’t.

9/12 Other sectors are winners, and for good reason, like Big Tech. What are you doing more of?
Amazon up 27%
Netflix up 30%
Zoom up 142%
The market gets these are some of the beneficiaries of the ‘new normal’.

10/12 Bottom line: the market covers big companies and small companies. It covers U.S. companies and international companies. And it covers all sorts of sectors that are reacting differently, and for good reasons.

11/12 The market is connected to where it thinks the economy is going and different parts of the market are connected to where they think different parts of the economy are going.

12/12 Don’t get caught up in the present popular narrative that the markets and the economy have nothing to do with each other. Until you see the connections clearly, you will struggle as an investor. And it’s for this very reason the market is so hard to beat.