“The two most powerful warriors are patience and time.” ~ Leo Tolstoy
Question: How do you think the economy will look going forward?
Answer: Because there was a rapid response from the government with monetary support and accommodative fiscal policy, the impact of the pandemic was likely less than it could have been at the onset. Low–interest rates continue to help provide liquidity for the entire financial system but can’t change the course of the virus. Going forward, further fiscal support is needed, but it has been slow to materialize. This is likely to cause slowed growth into early 2021. On the positive side, as vaccines evolve, this can improve.
According to the Bureau of Labor Statistics, between March and April 2020, we lost about 22 million jobs as a result of the COVID-19 pandemic. Through October we’ve gained about 12 million of those lost jobs. Unfortunately, even the enormous levels of fiscal support couldn’t save all jobs, especially those in the consumer services area, many of which aren’t going to come back right away, and in some cases, not at all.
As part of the stimulus, unemployment benefits were expanded and boosted. Those normally ineligible to receive benefits—the self-employed, part-time workers, those who have previously exhausted their benefits—could apply. The federal government added extra money to unemployment benefits—$600 per week—although that went away at the end of July. The increase in eligibility is set to expire at the end of the year.
The government’s funding authority ends December 11. It should be easy enough to agree on a Continuing Resolution to fund the government into the early part of 2021, but a government shutdown cannot be ruled out. Recall that we had a government shutdown for 35 days just 2 years ago (December 22, 2018, to January 25, 2019). Doing so in the middle of a pandemic would be irresponsible. Stimulus discussions are likely to get bogged down in the battle over spending.
The outlook in Washington depends critically on Georgia’s two run-off senatorial elections on January 5. If Democrats win both seats, the party would take control of the Senate 50-50 with Vice-President-elect Harris having the power to break ties. That doesn’t appear to be the likely outcome at this point, but stranger things have happened. If Republicans maintain control of the Senate, we can expect it to be a hard check on President-elect Biden’s agenda.
Biden will focus on the pandemic and rolling out vaccines. Further fiscal stimulus will be an important task—if we don’t get anything in the remainder of this year. Beyond the pandemic, two key issues will be foreign trade and antitrust regulation.
Don’t expect Biden to roll back tariffs on China. The tariffs have raised costs for U.S. consumers and businesses, invited retaliation—tariffs on U.S. exports—disrupted supply chains, and added uncertainty in the last 2 years. Decreasing tariffs would actually help the recovery. However, bashing China plays well politically, especially in the Midwest, and Democrats will keep that in mind as they look ahead to the 2022 mid-term elections and the 2024 elections.
Of course, the immediate focus is on the pandemic. Interestingly enough, many of the debates right now are the same as during the 1918 pandemic with battles a century ago over wearing face masks as well. The one thing we learn from history is that we don’t learn from history.
Not all areas of the country or sectors of the economy are experiencing the fallout from the pandemic in the same manner. Sales of vehicles, home furnishings, home repair, and groceries have moved beyond pre-pandemic levels, sales at clothing stores, department stores, gas stations and restaurants remain depressed. The Mortgage Bankers Association reports that Homebuilder sentiment as reported by the National Association of Home Builders Housing Market Index, hit another record high in November with single-family building permits up 0.60% in October (20.6% year-over-year), up 7.4% from February.
There’s been a great deal of bad news during the pandemic, with real pain and loss experienced by many. We face an ambitious agenda as a nation and as individuals navigating our way through whatever is next. The nature of work, offices, productivity and life in general has been transformed by the coronavirus. Connectivity is expected to lead the way as restructuring continues. Stay focused and plan accordingly.
The opinions expressed are those of the writer as of November 24, 2020, but not necessarily those of Raymond James and Associates, and subject to change at any time. All information provided herein is for informational purposes only and obtained from sources believed to be reliable and is not intended to be, and should not be interpreted as, an offer, solicitation, or recommendation to buy or sell or otherwise invest in any of the securities/sectors/countries that may be mentioned. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. “Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.” This article provided by Darcie Guerin, CFP®, First Vice President, Investments & Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145. She may be reached at 239–389-1041, email firstname.lastname@example.org. Website: www.raymondjames.com/Darcie.