April 14, 2022 – Stocks' Resilience, Beautiful World, Where Are You & Severance

• Headlines are relentlessly shocking of late. A lot of really bad stuff is happening right now, most notably a war in Europe that grows more gruesome by the day. There is also the worst inflation in over 40 years and growing fears of recession. Given our world’s current state of affairs, a reasonable person - with better things to do than closely follow financial markets – might assume stock markets to be deeply in the red. Yet stocks remain unexpectedly buoyant. The S&P500, for example, is only 8% below its all-time high reached at the beginning of the year. Why have stocks proven to be so resilient? A couple reasons. First, even with the Federal Reserve’s recent interest rate increase, bonds still do not offer an attractive yield (rate of return). In fact, with inflation running so high, real yields on bonds are still negative. Stocks, on the other hand, have historically offered more protection against inflation since corporations can increase the price off their goods or services to help provide a positive return. In other words, stocks have outperformed over the long-term. Second, many investors doubt that the Federal Reserve will follow through with its plan to hike interest rates as aggressively as it has indicated. The Federal Reserve, the thinking goes, simply lacks the stomach to risk tipping the economy into recession just to control prices. People who adhere to this view – myself included – are struggling to understand why the Federal Reserve would want to raise interest rates aggressively now, cause a recession and then be forced to lower rates when the economy tanks. One hope is that inflation begins to come down on its own, thereby reducing the need for future interest rate hikes. This could occur; if the last two years has taught us anything it’s that change happens fast. The world could look very different in six months. All the more reason investors need to stay the course and avoid making sudden changes to their investment portfolios. The recent downturn could turn out to be a minor bump in the road before there is a major rebound and stocks are off to the races once again.

• There aren’t many writers whose work elicits a reaction as much as Sally Rooney’s. Readers have feelings about her writing – both good and bad - that other writers just can’t seem to stir up. Perhaps folks are jealous of her success, or it could be that her writing is not worth the hype. If anything, her latest novel, Beautiful World, Where Are You, will only deepen the polarization. The novel revolves around four characters – Eileen, Alice, Simon and Felix – whose lives are catching up with them. Long gone are the carefree days of their twenties. They’ve entered their thirties and find themselves face-to-face with life’s tougher problems (i.e. staying in a flawed relationship or cutting bait; ambivalence about getting married and having children; leaving a stable career you hate for something potentially more fulfilling even if it means turning your life upside-down). The characters’ conversations touch upon these themes but also look at issues affecting our society more broadly – climate change and our current pandemic to name a couple. This was my favorite Rooney book. I found it captivating and it brought back a flood of emotions from pivotal decisions made in my past. Give it a read. It might do the same for you.

• My wife and I recently finished watching Severance on Apple TV+. This show takes creepy to a whole new level, but in a very good way. The show starts off slowly, focusing on Mark (played by Adam Scott), a seemingly normal office worker toiling away at Lumon Industries. What’s different about Mark, however, is that he has undergone a procedure called, fittingly, severance, which has split his brain into two completely separate selves. The work self (referred to in the show as an “innie”) and the outside the office self (known as the “outie”) have no knowledge of one another. The moment Mark takes the elevator down to his office, his memories outside Lumon are forgotten and he can only recall what has happened as an “innie”. When Mark leaves the office, his life memories outside of Lumon are brought back but he has no recollection of what he did while at work, ever. You quickly come to realize that Mark is suffering through tremendous grief in his “outie” life, the cause of which he is trying to avoid for a least some of the day as he labors alongside three other employees – Dylan (played by Zach Cherry), Helly (played by Britt Lower) and Irving (played by John Torturo) – in the cryptically-named “Department of Macrodata Refinement”. Although no one knows what their job actually is, they are reassured it is important even though it mostly involves finding the right combination of numbers on an incomprehensible screen all day. The show picks up the pace in the middle episodes, throwing curveballs that are sometimes explained but mostly leave you with more questions than answers. And perhaps that is the entire point of the show. Like many modern-day megacorporations, Lumon is shrouded in mystery, its inner workings kept deliberately secret. Severance takes this one step further, positing what happens in the future when a corporation has complete control over your memories so that you no longer even know what you do for a living outside of work. It’s a bone-chilling portrait of how companies think about and treat their employees. Prepare yourself before watching this show, it’s a nerve-wracking ride.