It was the best of times, it was the worst of times—
It was the era of 5G internet, free iPhone 12s.
Live sports games on TV, nearly empty stadiums.
Stock Market highs, but 10.7 million Americans unemployed.
Booming housing market, Federal eviction moratorium ended Dec 31st.
By January, there will be an estimated $34 billion in back-owed rent.
This is the 2021 Pandemic Economy in America
It’s definitely a more serious recession than is generally acknowledged. Before the pandemic ends, it may feel more like a Not-So-Great Depression.
Economic slowdowns in China, Europe, India, the Middle East, Africa, North America and South America negatively impact the entire globalized world economy. Most exposed to downturns in profits (and their Stocks) are large U.S. corporations that depend on international sales for growth.
The Unemployed States of America
There are currently 10.7 million Americans “officially” unemployed due to the COVID-19 pandemic in total. Last week, there were 853,000 new unemployment claims nationwide. But, the Covid Crisis is a worldwide medical and financial problem not limited to the U.S.
Do not be confused that the Coronavirus Pandemic has ended because Americans are now receiving the first of two vaccine shots.The coronavirus has ravaged every major economy in the world. Its impact is felt everywhere and will have a avalanche effect building in intensity downhill.
A Start and Stop Economy Ahead
It’s not pretty to think about, but the U.S. second wave and spring third waves of Coronavirus infections will kill even more business activity. We will see millions more headed to unemployment lines as “start and stop” lockdowns and statewide stay-at-home orders have returned.
The closings, openings, then repeated lockdowns will make any recovery take longer and look more like a series of jagged WWs and not the quick V recovery investors seem convinced is underway.
Don’t Expect a V Recovery
The Eurasia Group has presented in this chart exactly what we haven’t been able to put in words. There will not be a V or a K recovery. The long, slow process of returning to normal will look like an ugly “jagged swoosh.” That shape reflects years of long, stop-start recovery processes among the world’s leading economies.
If we and the Eurasia Group are correct, U.S. Stock Markets are defying logic, defying gravity, and ignoring reality. The global economy will necessarily reopen in stages until a vaccine is in place and distributed globally which will take longer than 2021.
As a result, neither the world economy or the U.S. economy will return to pre-pandemic GDP levels. Stocks will suffer as the recession drags on.
What To Do Next
We feel that if you don’t balance and diversify now, you’ll may be left to the mercy of the markets, the Fed, Washington, and the global rollout of the Covid vaccine. It doesn’t take much risk for us to predict roiling volatility for Stocks in 2021.
Individual investors can jump out of the market as quickly as they jumped back in after the first Coronavirus Crash in March.
We see the strong possibility of another 20% downturn predicated on any one of these unanticipated events—
- Realization that the Covid Pandemic shock is three times worse than 2008 Financial Crisis.
- Delays and stinginess in Congress passing more stimulus.
- Unexpected side effects or efficacy of the vaccine.
- Delays or a general lack of patience on a world vaccine rollout.
There are any number of Stocks that will perform well in this volatile environment. But, in our opinion, the greatest risk may be in owning international companies. We think this year’s hottest Stocks are very overpriced by any traditional measurement.
We feel a core holding of 5% to 10% of your liquid assets in Gold bullion and Silver bullion will prove to be the best portfolio insurance going forward. Think about whether owning precious metals may make sense for your family.
Talk to your investment counselor about the best approach to take in protecting your life savings in today’s crazy Covid World.