Remember a couple months ago when you thought, “In a couple weeks, everything will get back to normal?”
And then a couple weeks passed. The COVID-19 numbers kept on climbing. Businesses stayed shuttered. The quarantine continued.
“Okay, let’s give it a couple more weeks, and then we can all get back to work …”
The US and many other countries around the world have gotten tired of waiting for “normal” to resume.
As a result, we’re seeing the economy start to reopen even as cases continue to climb.
Meanwhile, you probably have received your first stimulus check, and have heard rumors about more on the way.
You’ve been watching the stock and bond markets, which have been going crazy.
No, COVID-19 is Not Going Away
First of all, let’s say we do sufficiently “flatten the curve” to get back to “normal” for the time being. No, that doesn’t mean that COVID-19 is done with us.
In fact, researchers at Harvard believe that COVID-19 outbreaks may return periodically.
US News explained, “In that case, it might be necessary to have several years of intermittent social distancing to fully introduce the entire human population to the COVID-19 virus without overwhelming the health care system, the researchers concluded.”
Are Stimulus Payments Enough?
The US government’s response to the current wave of COVID-19 cases and the necessary quarantine procedures has been the CARES Act, which has provided a degree of disaster relief.
But we are facing stark numbers when it comes to unemployment. Things haven’t been this bad since the Great Depression.
As Nobel-winning economist Paul Krugman explained, “And going back to the bill [the CARES Act] that Congress already passed: I’m fairly sure that we’ll eventually get the kinks worked out. But when you’re losing 6 million jobs a week, “eventually” isn’t good enough.”
Plus, the CARES Act doesn’t cover everything. It leaves a lot of massive gaps which could only be filled by policy changes or other forms of aid.
Economist Diane Swonk wrote, “Monetary and fiscal stimuli are not designed to offset the kind of disruptions triggered by a pandemic. Tax cuts cannot restart factories idled to contain the virus or boost spending by quarantined consumers. That hasn’t stopped investors from believing in miracles; the stock market rallied on March 2, hoping a rate cut would rescue the economy.
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A Global Recession Looms
Swonk also said, “We are now expecting a global recession as the effects of the epidemic disrupt economic activity across both developing and developed economies.”
Even though growth should begin again each time the economy reopens, it may not be sufficiently fast to offset job losses—especially since future layoffs and furloughs are likely.
Plus, it is easy to overlook the impact of the loss of services to consumers who need them over lengthy time periods. Many people have had a difficult time filling their most basic needs, and that too will cause massive economic fallout over the coming months and years.
What is the Outlook for Investors in the US?
So, what does all this mean for business and personal investors in the US?
Swonk wrote, “Business investment is expected to be hit the hardest by COVID-19. A full year contraction is possible given supply chain disruptions and the uncertainty associated with the virus. Firms now need to hedge against pandemics.”
What do you need to know if you are privately investing for your retirement? Experts are advising that the level of risk you are willing to take on should be based on your age. As usual, if you are closing in on retirement, you should reduce your risk. But if you are younger, you may want to do just the opposite.
Also, you are going to want to research different industries and companies to see how they are weathering events and are likely to in the future before buying stock. For example, industries like insurance and tourism are bound to recover more gradually than some others.
Will Things Improve?
The World Economic Forum reported, “The US and Eurozone’s economies could take until 2023 to recover from the impact of the COVID-19 coronavirus crisis, according to a new report from consultancy McKinsey & Company.”
Think about that—and think about how much we can’t possibly predict about the next three years. This is just a projection based on what we know now. It is possible that recovery could take even longer.
Still, we don’t need to be entirely pessimistic about the future. Paraphrasing a financial expert, CNBC wrote, “Through all the volatility, though, McClanahan still sees a silver lining: The coronavirus pandemic has exposed a lot of weaknesses in our markets, she says, adding that post coronavirus recovery offers us the opportunity to build stronger and more equitable systems.”
So, ultimately the question is whether “stronger and more equitable” economic systems will replace our existing ones. And who will answer that question? To a large degree, it will probably be voters in November.
Get the Advice You Need to Stay Afloat
Amid so much uncertainty, you may have more questions than ever about investing and planning for your future. What should your investment portfolio look like in a COVID-19 world? What can you do to bolster yourself against losses over the unstable years ahead?
At a time like this, a robo-advisor won’t cut it—you are going to want to consult with a human being who can look you in the eye and answer your questions. You need both economic expertise and a healthy mixture of caution and reassurance.
We can match you with a qualified financial advisor who can help guide your financial decisions through COVID-19.
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