Looking Ahead to a Post-Covid Economy
Connie Y. from Salem, OR asks: Good afternoon, Mitch. Hope you’re well. My question is about life after Covid-19. When do you think the economy will return to normal, or will it ever? What does that look like in your opinion?
Thanks for writing, Connie – I’m glad you asked that question. I’ve had the feeling recently that the American public is viewing the vaccine as a panacea that will flip-on the economy and ‘life’ like a switch. But I think it’s important to manage – and in many ways, temper – expectations about how this recovery may unfold.
First of all, let’s talk about the timeline. At current rates of vaccine uptake, it will be the end of the year or longer before we achieve mass immunization. But that should not necessarily be a major cause for concern – data already suggests that vaccination efforts are improving, and I strongly believe states will get better and more organized with time.
During times like these when the market is experiencing high volatility, it’s easy for investors to get attached to overwhelming news headlines that provoke emotionally-driven financial decisions. Even knowing that the market has always recovered, questioning that “maybe this time it’s different” is completely natural. While it is difficult to remain calm in this environment, I recommend not giving in to fear or panic – the actions you take right now have the greatest potential to define your financial future.
That’s why we have put together a free investing playbook with insights and guidance to help you seek success when investing through these unprecedented times. If you have $500,000 or more to invest, get our free investing playbook today.
Another point I think is important to make before I continue – Covid-19 seems highly unlikely to ever go away. That’s more a reality of viruses in general than a doomsday prediction for this pandemic specifically. Many Americans who have contracted the virus have developed antibodies, and the vaccine will help fill the gap to mass immunization. But the virus will still be out in the world. In terms of your question, there may never be a literal “life after Covid-19.”
I’m no scientist, but my guess is that by summer we will have substantially lower hospitalizations, deaths, and case counts associated with Covid-19, as well as a confident number of vaccines administered for life to go on as normal. The world may look a little different – people may still wear masks indoors, offices may be late to reopen (some may never reopen), public transportation use will be lower, and other adjustments will be noticeable. But I think the country will feel safe again, and people will be excited to engage.
From an investment perspective, I think there will be quite a bit of pent-up demand from the last year spent close to home – people will want to travel again, dine indoors, and engage more with the service economy. They’ll also have the cash to do it – by some estimates, households have added $1.7 trillion in savings deposits since last February, thanks largely to stimulus payments and to the savings accrued by services sector closures. By spring, total household savings could top $2 trillion, or 4.7% of GDP – an unprecedented surge.2
And therein lies a key takeaway for investors looking ahead in 2021, and what I think we can expect from “life after Covid-19”: all of these accrued savings are likely to drive a spending surge late in the year, and could also drive another sustained leg of the bull market. We just need to be patient for another few months, but good times are ahead, in my view.
In addition to experiencing life during a pandemic, I understand the uncertainty and concern that investors have during this time in the market. We’re living through extreme times, and while it’s difficult to remain calm, it’s important to take actions right now that have the greatest potential to define your financial future.
That’s why we have put together a free investing playbook3 with insights and guidance to help you seek success when investing through these unprecedented times. If you have $500,000 or more to invest, get our free investing playbook today. You’ll learn about seven time-tested guidelines to help you seek investing success through this historic “Black Swan” market downturn.
2 Time. January 7. 2021. https://time.com/nextadvisor/banking/savings/us-saving-rate-soaring/
3 Zacks Investment Management reserves the right to amend the terms or rescind the free Black Swan Investing Playbook offer at any time and for any reason at its discretion.
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