What’s Next for Stocks the Economy & Covid?

“Unimaginable” is a word I would use to describe the past several months.

We are not out of all this yet, but way closer than some want us to believe. As summer has just arrived, flu season is behind us and Covid positivity percentage and deaths are way down (thanks to keeping infected people away from nursing homes).

2020 will go down in the history books as a “reset year”. The impact from the prolonged economic shutdown will continue to play out, but one thing is for sure, it’s become a lot more acceptable to work and shop from home.  My client ZOOM meetings are working great!

Many big box companies and stores were able to stay open, survive, or in some cases (Amazon, Costco, Walmart, etc.) thrive. Meanwhile, millions of small businesses are gone forever. I’ve seen an estimate of 22% of all small businesses are permanently closed and 41% of those were owned by African Americans. Countless other businesses also had major setbacks from damage done from looters and rioters the past few weeks.

This is tragic.

Despite all this, I remain extremely optimistic about our future as it evolves.

One thing for sure is “where you live” is a major factor in what you see and how you feel about things.

Lockdowns:

Illinois remains one of the most locked-down states in the country. In the past few months, my family or I have been to Florida, Tennessee, Indiana, Ohio and most recently, Wisconsin. All these states are operating much closer to normal than Illinois. We’ve been golfing, fishing, eating at indoor restaurants and parties .  Traveling to these states made me see that we are on the way back to normal.  Seeing so many people out and about and not see any damage from rioters like we had in Chicago puts a smile on my face and gives me great optimism!

Had a great time in Cincinnati at my aunt’s 80th surprise birthday party!

As a result of the economic shut down, many large companies have been able to gain in sales and market share at the expense of shut down small businesses.   This has been a great for those company stock prices. The stock market as a whole has recovered a sizable amount of their March and April decline. 

You can see the green line below in the chart that shows the dip and subsequent recovery.

Economy:

Morgan Stanley doubles down on forecast for a V-shaped economic recovery by 4th quarter

Federal bailout programs have also helped tremendously as companies were better able to survive and unemployed people were given a great lifeline with additional money. I could argue against the huge debt the federal government has taken on, but for current stock prices it helped a ton.  I expect a V shaped recovery for jobs and GDP. The recession will be over after the June quarter is behind us.  The 3rd and 4th quarter will likely show massive growth in GDP and employment.

One of the best things to come from all the China related stuff, is that we were made aware of just how dependent the US is on China for production of what we consume.  For instance: 97 percent of all antibiotics in the United States come from China!

U.S. Dependence on Pharmaceutical Products From China

President Trump has been helping move some of our global manufacturing back to the US by adding tariffs and making better trade deals, (USMCA, Trump’s new NAFTA deal, explained in 600 words),  but we have a LONG way to go.  I expect a continued push to manufacture more in the US, which will ultimately lead to an even better labor market in the US. 

With historically low-interest rates expected for at least the next couple years, I see US stocks gaining in attractiveness relative to bonds. Low-interest rates bonds can provide very good stability (they actually went up in price when the stock market dove down in March and April), but do not offer much upside return.

Impact on City Living:

I also foresee a greater awareness of where people choose to live. People can’t help but be much more aware of the differences between living in urban and rural areas or suburbs. It’s interesting to see how different states and cities are governed. 

Depending on what you favor, knowing what you know now, this may impact where you choose to live. Another factor may be state and city government choices regarding policing in their cities.  Lastly, as we have already seen, state income and other tax policies may drive people out of high tax states.

Americans Are Fleeing High-Tax States In Record Numbers

Post shutdown reset includes:

• many new companies flourishing

• computer sharing meetings skyrocketing

• working from home (no commute) 

• many blue chip and many small businesses are now extinct

• people rethinking where they want to live

Changes are going to evolve over time. We will get through this tumultuous 2020 and somehow better for it.

Covid-19 Hard to Find Numbers – media never mentions

Many of my readers live in DuPage County (population about 950,000). You may like to know that the county’s under age 60 population without a pre-existing condition have only had 7 deaths (“with”/ not necessarily “from” Covid) and ZERO deaths under age 30.  More testing means more cases. Illinois’ positive test rate is down to a meager 2%.

Sunday, June 21st – more coronavirus positivity: Just 297 deaths today nationwide, the lowest number of deaths since March 24th. Deaths are now down 90% since the peak set in late April.  I only wish this would be a news headline or at least be reported on network news….

Glad my three college age kids will be back in school this fall and assume k-12 will be back as well. 

We all have a lot to be thankful for. Things will be different going forward, hopefully for the better, but it will depend on your perspective.

Please reach out to me if you would like to talk or set up a meeting to discuss your situation. 

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