Business Economics Investing

The Middle Ground

Some of you may be wondering what middle ground is since it hasn’t really existed for a couple of decades now. The middle ground is in between two extremes, where proponents of both extremes compromise to find a solution that is as close as possible to a win-win for all parties involved. Everything today is so polarized that a balanced perspective and/or measured approach is quite rare, at least in the public sphere. Take COVID-19 for instance. One side is very focused on shutting the world down to prevent the spread of the virus and any potential deaths while the other side either believes no precautions need to be taken or that the whole pandemic is a conspiracy of some sorts. Extreme viewpoints are rarely representative of reality. As in most cases, the truth most likely lies somewhere in between.

Sticking with COVID 19, at the two extremes you have a very passionate movement determined to minimize, if not completely neutralize, any deaths related to the virus while the other extreme doesn’t appear to believe social distancing and other measures are necessary. While I’m sure one extreme’s views of the other are fairly negative and punitive, I doubt those that are passionate about saving lives don’t care about the economy and I’m pretty sure most people at the other extreme don’t disregard human life as many have suggested. The problem in the case of the pandemic is that both extremes lead to highly undesirable outcomes for the other extreme. There is no ideal solution to the current crisis, but there rarely is in these types of situations. We haven’t had to make hard decisions like those that were around during the first half of the twentieth century in the midst of two world wars. We want to have our cake and eat it too. I don’t think that’s a possibility in the current environment. Hard decisions need to be made which will potentially lead to more deaths or economic ruin. I’m not going to take sides here, but compromise and finding the mystic, elusive middle ground are going to be necessary if we’re going to arrive at a favorable outcome.

Another example of extremes is the future of the economy. One extreme believes our economy will make a v-shaped recovery, which is effectively a quick snap-back to where we were before, while the other extreme believes the economy is headed for, or is already in, a depression. Nobody can say with certainty but I have to wonder if the eventual reality lies in between the two extremes.

The final example of extremes for today is the stock market, which is partially related to the economy. One extreme appears to believe that stocks will resume their upward trend once the pandemic blows over, while the other extreme believes the stock market is going to crash as a result of the pandemic’s impact on the economy. Again, no one can say with certainty here but there are other forces at play there that will likely have a major impact on the outcome. The Federal Reserve’s trillion dollar efforts will have a large say in what ultimately happens with the stock market. The eventual stock market reality most likely lies somewhere in between the extremes with a potential tilt towards the more positive extreme due to the Federal Reserve’s efforts.

The middle ground is a great place to be when dealing with uncertainty and extreme viewpoints. Measured and balanced approaches to these situations will most likely yield the most favorable outcomes for all parties involved.