13 Jun The Worst Is Over, Or Is It?
Six months into 2020 and we have already experienced more not only globally but also as a country. It is not hard to see why this year has been especially hard and every American in one way or another whether you lost your job and lost your regular way of life. Society just back to the quid pro quo so do we. But what exactly does that look like? Well, from the way we worked we relax and shop everything is going to be different. Especially the economy, the way people spend, save and invest will surely be affected for months and months if not years to come. Just as you and your doctor must assess your situation, health and wellness is different than his last patient. So, awesome if you and your financial advisor decide how you and your family are going to adjust to the changes sure to come to the American way of life. The first change probably is not hard to notice if you look at the newly revived travel, hospitality, and service industries. Looking at everyone back in their favorite restaurant with smiling faces after so long makes you almost forget about the peace and that is laughter-filled gathering space is closed up in the first place. That is until you see the entire staff sporting their personal or company brand of face shields. It’s true the COVID-19 pandemic is far from over but at the end of the day the country just couldn’t afford to stay closed any longer. California especially suffered from the quarantine as we now face a $54 billion budget deficit due to the massive loss in tax revenue from one of the largest service industries in the country which is the lifeblood to the world’s fifth-largest economy. Although we are back in public spaces, social distancing is still being held up by most businesses as best as they can. Not to mention by the people who have been standing 6 feet apart for close to a third of the year already. Needless to say, that habit is going to stick around for a while, but how long exactly? Well as flu season comes to an end and warm weather is upon us we will not likely see as many weak immune systems as we did at the beginning of the outbreak in late December but that doesn’t mean that the cold weather isn’t coming back. The real question is what measures will we have in place to fight the coronavirus by the time we start seeing the regular spike in runny noses and sore throats? If we have a vaccine developed in the coming months, it is not likely that social distancing will continue into next year. But how likely is that? According to healthline.com, a vaccine may well be developed and ready for distribution by January although they say that the odds seem like they might be in the houses favor. This is mainly due to the lack of understanding and knowledge our medical specialists have on the coronavirus. This has slowed the development of the vaccines that are being worked on in countries all around the world. And although many are confident that their formula is the key to beating COVID-19 clinical trials are still needed to ensure that the vaccine is not only safe but also effective. The process of developing an effective vaccine usually has a time frame of multiple years, not a few months, but with no time to waste countries have been racing to develop a vaccine that will help everyone sleep a little better at night. Another positive variable in this equation is the fact that both governments and corporations alike are looking to solve this problem as soon as possible, meaning they want to start producing vaccines before they have been fully tested. That being said the American government has agreed to produce a potentially useless product if it means that we get a vaccine out sooner than later. If the clinical trials prove true, then it would have been a wise decision. If not, that is some expensive garbage.
Vaccines being developed at Oxford University the National Institute of Health and a pharmaceutical company called Moderba show great promise although it is too soon to make any assumptions they do say their goal is to have a vaccine ready by the end of the year. So, we know we could have a vaccine ready as early as a few months from now, but nothing will be sure until those clinical trials have been thoroughly completed so we can expect six months at the earliest. This means six months more of social distancing and many of us are going to continue working from home whether we like it or not. However, many companies have experienced an increase in productivity or at least have not seen any sort of decline in their workforce effectiveness even though they have been working from the couch and not a cubicle.
This is the next big change coming, companies such as Twitter, Square, and Facebook have decided to continue letting the employees work from home although they are not allowed to move if they do move to a different location they will be forced to take an adjusted pay wage based on their new location according to Jack Kelly Forbes magazine take Lister president of global workplace analytics stayed at 70% of the workforce say they want to continue working from home at least weekly when the pandemic is over she has made the 25 to 30% of the workforce will be working from home multiple days a week by the end of 2021. The easy use and accessibility of technology used for collaboration such as Zoom, Google Hangouts have made the transition from office to coffee table seamless for most companies. Employees get to avoid long commutes and executives are aware of the opportunity to save on real estate costs as fewer and fewer people will be needed in the office. Shopify, Coin Base, Up-Work land schools and many others have also permitted their employees to continue working from the home Shopify a global company has stated that they will continue to keep their office is closed until next year if they rework their spaces for the new reality of the workforce of the workplace once this is all over. Although many companies will still require employees to meet in a space Apple is one of these companies. Many believe that by having employees work from home you could lose the culture and the collaborative environment of the workplace. This and the level of secrecy Apple prides themselves in surrounding their products are two reasons why they probably will not be participating in the work-from-home trend.
Being that our business and pleasure are both heavily affected it makes sense that the stock market is going to different than usual as well. Reade Pickert, Yue Qiu, and Alexander McIntyre of Bloomberg.com gave their input on the mid-pandemic economy. The con the economy has had quite a bit going against it in the time of COVID-19 which caused many financial and economic experts to come to some seriously black estimates on the future of the US economy. And although the US economy is still is not as was previously expected we are still falling short in many areas including our job market. Not to mention the fact that COVID is keeping people in their homes which is slowing down economic recovery. This fear is evident as businesses that are trying to make up for three months’ worth of lost revenue are still experiencing lower than normal customer frequency. But the real economy killer continues to be the staggering number of jobless Americans still trying to find work, and some are even still trying to get their government assistance whether that be unemployment or the stimulus check. The housing market however seems to be the golden child amongst all the chaos with historically low mortgage rates giving us a real estate rally. However, historically low mortgage rates are going to come hand-in-hand with higher demand. This could drive the price of real estate up in many areas. However, we are seeing many people move out of certain expensive locations due to the COVID-19 impact, so the influx between supply and demand should clear up more and more as people go back to work, customers go back to shop, and the economy gets at least back to some sort of stability.
But how will these actors affect you and what did you do with your money? Well, the first thing that could be affecting you and your family will be joblessness if anyone in your family is impacted by this it is important to act fast. Obtaining another stream of income as soon as possible is crucial to not falling behind on your bills during a recession. That could mean a side hustle while you look for a new job or reallocating your money into an investment strategy that can provide you with a consistent income in the short run at least long enough to last you through the next six months to a year that we could be dealing with the COVID-19 aftermath. The only reason I would not suggest relying solely on unemployment is that the system is so heavily saturated with requests. Unemployment can only handle so many applications at a time. This puts you at the end of a very very long line.
The next thing you must do is prepare for the future that lies ahead of us over the next few months. This feature is going to have a recovering of all the markets as everyone around the world adapts to life changes caused by COVID-19. So, once you get a more stringent, recession-proof budget together for your household, it is important to make sure that your money is prepared for the market ahead. In the last two weeks or so the market has seen massive gains and massive losses as well. The largest gains have come from industries that were beaten down from the travel restrictions caused by the pandemic. Boeing had a 41% week to week increase which is impressive counting that the Dow Jones was down as much as 34.9% to the crisis closing bottom on March 23. The NASDAQ and S&P 500 and Dow Jones were all up over 2% after last Friday’s session. Energy also saw a healthy one week gain of 13%, surely due to everyone getting back to work and back on the roads. Hotels resorts and cruise liners were up 22.4% on the week. However, on Thursday Dow was hit hard and fell 1,800 points, the worst since the low in March. The S&P dropped -5.89% and the energy sector reported -9.5% Delta Airlines however was able to pull up for a 4.64% gain on the day. The decline is largely in part to investors being scared off by the rising reports of COVID cases as the country reopens, as well as Fed Chairman Jerome Powell’s less than bright outlook on the market recovery. Many financial specialists such as Kristina Hooper, Invesco chief global market strategist, do not believe that this will be a continuing trend downwards but that only adds to the confusion of the situation. It is important to create an investment strategy to tactfully take part in these gains and join the economy on the rise back up while also making sure that your portfolio is diversified with alternatives. By placing a section of your portfolio in real estate, energy, or another investment outside of just equities can ensure that market volatility does not put a hole in your finances. This is especially important if you are getting ready for your golden years or are already in them.
Yes, the market is going to be different, work is going to be different, everything is going to be different. but that should not change your goals. With tactful investing, you can maximize your assets and minimize your risks to ensure that you reach your financial and personal goals no matter the rest of 2020 can throw at you. So, whatever the case may be, make sure that you and your money are ready for the years to come and contact us at Ortiz World Wealth. Just because the economy is slowed down does not mean you have to. Now is the time to bounce back better than ever so remember, Plan Smarter & Live Better.