Four weeks ago, I was riding a wonderful wave of excitement. The economy was good, new clients were inquiring, new proposals were being written, new employees being interviewed, new speaking engagements were being booked, my health was good, and my family was feeling fine. I felt light and excited for the future. Even on the gloomiest of February days, I saw and felt was the bright sun.
The World Went Sideways…..
Then the world went sideways. Both my health and my mother’s health received bad and shocking news. The stock market went into free fall, events were canceled, schools closed, and everyone ran to the store for toilet paper. The world felt like it slowed way down. I immediately flashed back to 9/11 and November 2008, when uncertainty and fear rolled across America like a hurricane coming onshore. Frankly, last week, I felt like I was in the hurricane and the waves were bound to pull me under.
I admit I am not a virus expert. I am not sure what it will take to cure the virus, create a vaccine or when it will go away. Additionally, I am not a financial advisor and I do not work on Wall Street. However, I do understand the downstream impact of businesses and schools closing for weeks. The impact of conferences and sporting events being canceled is huge. Lastly, the impact of the supply chain becoming compromised can last for months. I wanted to share my thoughts on what’s going on and what we, the average joes, could do to manage through this.
History has shown that when we have a widespread illness, like the Spanish Flu, we experience short-term economic impact. Followed by a bounce back. That gives me some hope the market and economy will rebound when we get this virus under control but, I truly believe its more complicated.
We have other factors to consider.
Factor 1: Globalization
We are far more globally connected than we were during the Spanish Flu, our supply chain wraps the globe. It didn’t in 1918. You may be thinking, “Lauralee, we had SARS and it was just a blip on the radar”. But, China’s supply chain reach has nearly doubled since then. According to a recent HBR article, during SARS, the GDP of China represented 4.31% of the world GDP. By contrast, the number of detected cases of Covid-19 has already passed 80,000 and China represents about 16% of the world GDP, an almost four-fold increase. The biggest impact to the supply chain is just around the corner.
Factor 2: Polarization of Politics
Polarization of Politics: The USA’s political environment is dysfunctional at best and toxic at worst. Our inability to collaborate and comprise has resulted in the delay of much needed new policies and too much indecision. We lack unified trust in the government and their ability to make effective policy. This dysfunction will hold back our recovery.
Factor 3: Rates
Safety Net Is Gone: Today the Fed announced they are dropping rates to near zero percent. Folks, this is the lever we pull when we want to improve the economy. It is our best way to turn around a recession. We’ve become addicted to low rates and cut rates at almost any bump in the economy. There’s a large portion of the population that has NEVER bought a house in a 6, 7, or 8% market. Yes, there was a day when I personally sold 10% mortgage rates. We’ve lost this lever and lowering rates to near-zero will likely not help as much as it did in 2009.
We did not normalize the rates over the past 5 years and I think that’s a problem. I believe this has contributed to the widening gap between asset owners and non-asset owners. I also believe it negatively impacted our most conservative savers. Not everyone wants to play the market and yet, CDs and Savings are not paying so there’s a population of people who do not have a savings even in the long bull market.
The bottom line, a recession is likely or at minimum a retraction in the economy.
With all that said… what do we need to remember? And what can we do about all this?
Take a breath
First, the stock market is not the economy. So, last week’s stock market volatility was a response to the uncertainty. We can expect a 10% market correction about every 18 months. We’ve been in a long bull market and most of us knew a bear was due to return. So, now is the time to look at your asset allocation. It’s likely NOT time to sell but, it is good to see where your money is allocated, and determine the next steps over the months to come. Take a deep breath, pick up the phone and call your financial advisor.
Follow the guidelines
Remember, this too shall pass. So far, humankind has survived all previous pandemics. Of course, there have been times when millions have died but, today our healthcare systems are better than ever. We have the ability to treat people in ways we could not with the Spanish Flu or the Black Plague. Remember, this will pass. Let us all do our best to follow the safety guidelines from the CDC.
This is going to sound like I’m jumping the gun but, I’m sharing what I think will be needed in the near future. Remember, looking for a job starts with a resume. I would love to compare the number of job openings on LinkedIn on February 1, 2020, and March 30, 2020. My guess is that we will see a large slow down on new job postings due to the uncertainty and the slow down in the economy. Simple, there are too many industries being impacted to not see layoffs. I hope I’m wrong. Getting laid off is outside of our control but, preparing just in case is well within our control. Stay calm and be prepared. Not Doomsday Preppers prepared, but more like, take an umbrella in case it rains prepared. Sharpen your LinkedIn profile, stay connected with your network, and update your resume.
Remember, we all make bad decisions when we are panicked. I’ve always been hyper-focused on the future. I’m always thinking about tomorrow while my husband makes sure we do what needs to be done today. So, of course, for a moment I felt like the sky was falling, my clients would disappear and life was over as I know it. Then, I sat down and thought about peace and stillness. I shut my mind off and took many deep breaths. You and I have survived other ups and downs – we’ll get through this one too. So, what do you do, now? Be still.
My Final Thoughts:
To the person that bought 17 large 36 rolls of toilet paper packages leaving none for the rest of us…. now is not the time to be self-interested. Instead, remember that ALL of our interests are linked together, young and old, rich and poor. We are in this together.
Be kind. Be patient. Help your neighbor. Check-in with your friends and colleagues to ask how they’re doing. Take a walk in the woods. Hug your dog (that makes me feel better every time).
Things you may not want to do right now: Don’t go on a cruise or travel overseas. Don’t push people down for rolls of toilet paper. Don’t steal hand sanitizer. Lastly, don’t freak out your children, remember they’ve likely watched the Walking Dead.