*NOTICE*

Marks Group would like to express our thanks to clients and families we work with for your understanding and flexibility to adapt to the new realities brought upon us by COVID-19. All meetings will continue to be conducted via phone call or video conference until further notice. Our Minnetonka office remains closed to visitors, but is consistently staffed during regular business hours by a handful of dedicated Marks Group team members. The rest of our advisors and staff are working from home. While it’s unfortunate we are unable to meet face-to-face for the time being, you can rest assured all operations are running at full capacity. If you have specific questions, please do not hesitate to contact us directly.

Ben Marks, Chief Investment Officer

Quarterly Update

April 20, 2021

Dear Investors,

Finally, something to write about other than COVID-19: The Infrastructure Bill. There will be plenty of haggling over who will pay for it (higher taxes) and what projects will get funded, but most Americans agree spending money to improve our infrastructure is a good idea. We certainly need it. If you have traveled to other developed countries (pre-COVID, of course) you observed that their bridges, roads, railways, and internet connections are simply better. We live in the wealthiest country on the planet. Our infrastructure should reflect that.

The scale is going to be enormous. Plus-or-minus $2 trillion, though it may well take most of this year to iron out the details. To put that number in perspective, construction of the US Interstate Highway System was approved in 1956 with a budget of $27 billion. That’s $260 billion in today’s dollars, roughly 13% of the proposed $2 trillion in new infrastructure spending. This is a BIG deal!

Are we mortgaging our grandchildren’s future? Absolutely, but at least this time we will be building something tangible that benefits future generations and improves their quality of life.

As I have written about previously, we are fortunate to live in the country that is home to the world’s reserve currency. It’s an enviable advantage that allowed the Federal Reserve to increase total US dollars in circulation (the money supply) by 20% in the past 12 months. And because interest rates remain near historical lows, the US Government can issue massive amounts of debt at less than 2%. If we consider future inflation expectations, the effective cost of borrowing is less than zero.

For many investors, inflation (not COVID) now tops the list of concerns keeping them up at night. It’s evident we have begun a period of escalating inflation, but I agree with Fed Chairman Jerome Powell that it will be transitory. As the economy re-opens there will be supply/demand imbalances, which are already driving prices higher. Eventually, however, the pent-up demand for goods and services will be met. Unfortunately, there are many workers, especially in the hospitality sector, who remain unemployed and disproportionately impacted by the shut-down. These jobs should return in the months ahead. For those fortunate enough to stay employed, most have historically high levels of savings, thanks to stimulus checks and lower consumer spending while we all hunkered down at home.

Once the spending splurge subsides, inflation pressures will likely diminish. Minimal population growth in the developed world (and China) along with meager annual productivity gains should also keep inflation relatively tame. A big chunk of the proposed Infrastructure Bill is allocated to revitalize US manufacturing and secure our supply chains. The bulk of those funds will be invested in automation, reducing the need for manual labor. This will help keep labor costs in check. Kickstarted by the pandemic, technology will continue to evolve at an accelerated pace, creating efficiencies and keeping costs of goods and services affordable.

Stock market returns continue to exceed expectations. Pockets of excess will eventually correct and rotation into more sensibly priced sectors has already begun. Any public health setbacks in the COVID-19 battle will be met with great disappointment. Absent that, be prepared for when positive economic news becomes a drag on stocks, based on concerns the Fed will eventually throttle back its asset purchases and raise short-term interest rates (leading to tighter financial conditions).

In the meantime, we remain disciplined in our investment selections and ever mindful of how changes will impact your long-term financial plans. While you can always find reasons to be pessimistic, don’t underestimate the resilience of the US economy.

Enjoy the spring and the opportunity to finally be together again with friends and family.

Be well and stay strong,

Ben Marks, Chief Investment Officer

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Stock prices and index returns provided by E-signal.

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