Stock Market: Happy Easter 2022

(Drivebycuriosity) - It`s Easter again. Many countries in the Western world celebrate Easter in some way or another. In Germany for example most people have 4 days off, including Good Friday (called "Karfreitag", a Catholic term) and Easter Monday. Even Wall Street was closed on Good Friday.

Easter also stands for the begin of spring. The German literature has a lot of Easter poems which are referring to the seasonal issue. The most popular German Easter riddle is "Der Osterspaziergang" (the Easter walk  osterspaziergang) by Johann Wolfgang von Goethe. It starts with the line "Vom Eise befreit sind Strom und Bäche" ("freed from the ice are rivers and creeks").

This time the US stock market is in correction mood. The war in Ukraine is spoiling the sentiment and the red hot inflation (prices up 8.5% annually) forces the Federal Reserve to hike interest rates swiftly which might cause a recession.

  

 

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Anyway, I believe that this correction will be short-lived - like so many corrections before. The stock market is in a long term upward trend lead by continuously climbing company earnings. Company proftis are climbing faster than the GDPs because corporations are getting more productive over time - thanks to learning processes and technological progress. The stock market gains since 2009 are fueled by the accelerating technological revolution which got boosted by the Covid-19 crisis. It seems that the pandemic started a new Roaring Twenties, comparable to the boom phase which happened during the 1920s years after the Spanish Flu.

Covid-19 changed behavior and accelerated the fundamental trends that have been shaping economy & society in the recent decade. During the pandemic the rise of the Internet gained even more speed and turned into a great leap. The pandemic reduced the resistance against technological progress. The crisis forced many people to work at home, to learn, shop, educate & entertain themselves from home. These trends are fostering digitization and raising efficiency & productivity of the economy.

The virus boosts the digitization process, which is fostering productivity across all industries, leading to more economic growth. Microsoft`s CEO Satya Nadella said "the pandemic has proven the PC’s central role in keeping people connected, productive, and secure ...What we are witnessing is the dawn of a second wave of digital transformation sweeping every company and every industry" (transcript ). Last year Nadella noticed that “two years of digital transformation took place in two months” ( microsoft ).

We are witnessing an accelerated shift toward digital technologies that are faster, less expensive, more productive and raise creativity. Companies are compelled to streamline operations and they are using more & more Internet & and other software applications to get more efficient, creative & productive. The pandemic forced them to get faster and make their products & services cheaper and more convenient. These changes are accelerating the ongoing digitization process, using Internet and other software applications more intensely. The CEO of Bill.com, an online service, said: "We believe the ongoing pandemic has accelerated the need for businesses to focus on digital transformation” (seekingalpha).

Covid-19 made the companies fitter and more efficient than before which translates into climbing profits. I believe that this learning process will continue and will fuel a long term trend of rising company profits & stock markets.