None of us have been here before! An editorial that recently appeared in the Wallstreet Journal proclaimed what all of us are feeling: “To say these are unprecedented times would be the understatement of the century. Even as the United States became the latest target of Hurricane COVID-19, in “hot spots” around the globe a continuing frenzy of health concerns represented yet another drop down the economic rabbit hole.”
Most of the country is under a stay-at-home order and it appears as of today that will be the case for at least another two weeks. Then the major question becomes how we put our financial world back together, so it begins to operate and respond correctly.
One economist said what we know: you just can’t flip a switch and see everything come back online. It has to be gradual and it has to match the part of the country where we live. New York, for example, will respond differently to reopening than a small city in Arizona!
I listen as people try to compare this in some way to 9/11. It’s not the same. Our country pulled up to a stop sign and was told to stay there. After 9/11 businesses and especially Wallstreet reopened. At first, this was done to override the panic that Americans felt.
Past and Present Dangers
We were facing huge losses—financially, emotionally, and physically. Our very way of life was threatened, and the American Spirit needed to rise up. The president at the time also urged us to travel, to get out, to have dinner with one another, and to shop—strengthening the economy and bringing a sense of healing to our country.
The coronavirus has none of these earmarks. The fact is, most of us have placed our lives on hold over these last few weeks. And actually, this pandemic has put our global economy on hold. We are in the eye of the storm.
Americans are using phrases that once were uncomfortable and unthinkable “social distancing” for one. Before Covid-19, unemployment was at a record low and the stock markets were at record highs.
At the end of the second quarter, our jobless rate could be 30% according to Federal Reserve Bank of St. Louis President James Bullard. This would place our unemployment rate greater than it was during the Depression in the 1930’s.
Small businesses will struggle to reopen, and others could end up going through bankruptcy. How does this affect your life and your investments?
Small business are the life-blood of our national economy. “After all, about half of all small businesses in this country had less than a month’s worth of cash set aside as the coronavirus hit and they employ almost half of the private workforce.
“In truth, mom-and-pop stores, not the giant corporate entities, are the engine of the economy. The restaurant industry alone could lose 7.4 million jobs, while tourism and retail sectors will experience significant turmoil for months, if not years, to come.
“In the first week of coronavirus economic shock, a record 3.3 million Americans filed claims for unemployment. That figure was nearly three times the peak of the 2008 recession and it doubled to 6.6 million a week later, with future numbers expected to rise staggeringly higher” (The Wall Street Journal).
What we learn here will lay the groundwork for the future.
There’s no question markets like this one, the last Black Swan event, 911, and not unlike the recession of 2008 and the tech bubble of 2000 offer great insight and learning moments for assessing your risk tolerance.
For over 20 years, I have predicted when a bad market is on the horizon and I have been correct. When a client asks me about taking more risk in their accounts, I ask that person to evaluate risk based on how much you’re willing to lose, and NOT how much you’d like to gain.
At Alphavest, we have a robust risk tool that can help you re-evaluate your concept of risk and match it to your portfolio. AND you should wait until this market reverses back. It will, within the next 3 months.
While this crisis is obviously different than in 2008, a viral pandemic is not the equivalent of a subprime meltdown, but like 2008, our economy has taken a hit like nothing we have seen before. It is truly historic.
Once the thread of the virus dismisses, you will see stock and debt bubbles that inflated over the past 12 years beginning to grow again. So, my advice is this. Know that you can be better in the end of all of this, but you need the right plan and the right advisor.
Covid-19 may have a very disruptive effect but you can go forward. Our economy was already at a pivotal point. It is just that the coronavirus became the catalyst for a perfect storm on Wall Street and Main Street. It introduced a tipping point throughout America and really, around the world.
Truly, this global impact has created a great crisis in the history of our county in a much shorter period of time than any crisis in our history. And I believe we will need even in order to steady the foundations of our global economy.
So, the best take-away from all of this is this: the best offense is to have an excellent plan in place. Yes, having a good defense counts but I believe beginning with a smart and wise plan will keep you right where you need to be when any crisis hits.
Lastly, don’t forget that this virus is also being driven by social-media and the news media. It fits perfectly into the news cycle, the interconnectedness of global supply chains and a pricey stock market, all of this works to make Wall Street look more vulnerable.
Staying on financial course, taking care of yourself from a wealth-management perspective and a health perspective are winning elements to any shift in the market.
As a trusted financial advisor, I can show you how to create a plan that works and a financial investment plan that will take care of you in the years to come. Schedule a free 15-minute consultation with me today and let’s make a plan for you that will work today, tomorrow, and the future.