Your Financial Future: Be prepared moving forward
The economy is starting to turn the corner from the pandemic with the health issues. While social distancing, hand washing and other preventive measure must continue, we are seeing fewer hospital admissions and deaths than a few weeks ago. This is great news.
The government faces a tug of war between the health care officials and the economic leaders. We need to be careful of a second wave of infections. We need to develop more testing that is quicker and costs less. There is a lot not known about the virus, including whether you can get it a second time, whether there is a cure and if there a vaccination.
Yet, we have to balance this with starving the economy and get people back to work. Business owners are seeing a life time of work disappear before their eyes. Many small businesses in our towns and cities may not survive. Many retailers have been closed for more than a month. They have stores full of spring, Easter and Mother蘑菇视频 Day apparel that couldn鈥檛 be sold. Retail buyers are currently purchasing Christmas merchandise. How confident would you be to buy large quantities with all of the uncertainty? Our economy is 70% consumer driven.
We are hearing that close to half of all people are having trouble paying their mortgages or rent. Food banks are distributing millions of pounds of food. This is after only four to six weeks without work. This is why financial planners say you need six months of emergency money.
Auto plants are shut down. Who is buying a house? Hotels are almost empty. One large brokerage firm is predicting Disneyland and Disney World might not re-open until 2021 鈥� and then with limited attendance. Disney itself has not yet made a prediction. Last week, the oil companies were willing to pay people to take their oil if you had storage facilities. That has never happened before.
In Pittsburgh we are not playing baseball or hockey. All concerts and shows have been canceled with no idea when things will resume. This costs many restaurants and other businesses a lot of income. But, it has cost governments millions in lost tax revenues. How do they continue paying employees? How about infrastructure improvements like bridges and roads?
We have lost 26 million jobs and government debt is exploding. The federal government cannot bail everyone out. The FED is printing money and Congress is passing it out. While we need this help temporary, we are going to have to pay for this with higher taxes and inflation. There is no great answer.
One area that seems a little disconnected is the stock market. We went down in record time. The next month we had the largest one month increase ever, 29%. The market is only down 16% from their record highs. While this still hurts, it is bearable. There could be a second dip if a surprise develops. The market probably does not reflect the new normal. Things are going to be different in the future. Only five stocks out of five hundred make up 20% of the S&P total value. Wow!
The good news is we will overcome this crisis. Many economists think it could take a year or two. Get your family better prepared for the next time. Save more emergency money and reduce credit exposure. Make sure your investments match your risk profile and time horizon. Maybe more people should follow the Boy Scout motto, 鈥淏e Prepared.鈥�
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, 鈥淵our Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.鈥� If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.