Tuesday, December 1, 2020

Trust Your Instruments

Ask the CFP


 

We can chart our future clearly and wisely only when we know the path which has led to the present.” Adlai E. Stevenson, 1900-1965, American Politician 

QuestionWhat changes do you think COVID-19 will bring to us in the long-term?  

Answer: It’s becoming clear that COVID-19 isn’t going away anytime soon. One long-lasting change is the tendency to work from home for many. The economy is always evolving, and as we’ve seen, rapid changes can be destabilizing. There will be a number of challenges and changes as we move forward.  

 


 

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The shift to e-commerce and online shopping is obvious as consumers refrain from flocking to the malls; except of course if you’re a teenager and this activity is an important element of your social life. Clothing sales surged and motor vehicle sales also rose. One explanation is that we spent more on tangibles while in quarantine. A consequence of this is reduced supply and lower inventory levels, which will take time to normalize due to supply-chain issues. Auto-dealerships, home furnishings, home improvement, sporting goods, and grocery stores are all doing better than before the pandemic. In contrast, department stores, clothing stores, gasoline sales, and restaurants are improved, yet remain far below where they were in February. It will be a long time before we see signs of full recovery in tourism, air travel and spectator events.  

Manufacturers overall have adapted to working under pandemic constraints, but it hasn’t been easy. Manufacturing output fell sharply in February and March, especially in motor vehicles. All major industries are still below pre-pandemic levels, except for technologylikely all those laptops needed for working from home. Social distancing slows everything and consumer behavior regarding another round of stockpiling supplies and materials is a wildcard. The foreign trade deficit has widened as exports fell. In general, overall prices are up as demand increases with the Producer Price Index up 0.40% in September. There will continue to be supply chain issues as we rebuild inventories.  

There appears to be a long-lasting shift to work-from-home environments. This has contributed to an increased demand for housing, which isn’t typical for a weakened economy. Economic activity is expected to expand and unemployed workers will be reallocated, but these transitions will take time. The Fed stated that they’ll provide an adequate level of liquidity for our financial system, likely keeping interest rates near 0% through 2023. One possible benefit of this is a lower incidence of foreclosures and evictions, especially at the lower end of the income spectrum where employees have been hit harder.  

So back to your question, what changes do you think we’ll see in the long-run as a result of COVID-19? If you have not done so already, it may be beneficial to have a conversation with your Certified Financial Planner ProfessionalIn the meantime, do your best to tune out the short-term “noise” in the news, including political news. We’re in the process of obtaining more facts as to how our ‘new normal’ will evolve, and it likely includes heightened market volatility. Individual portfolios should be designed to match an investor’s comfort levels and goals. It is helpful to have a plan, the right people on your team, and an investment process in place.  

Stay on Course 

Boat captains and pilots faced with uncertain and unstable weather conditions know that it’s imperative to trust their instruments. An unexpected storm or blinding wall of fog can destroy one’s sense of direction and alter perceptions. Although often counterintuitive, safety and shelter from the storms are usually best found by relying on navigational tools and facts and evaluating any appropriate adjustments while staying focused on outcomes.  

Short-term events are just that, short-term. It’s natural to be drawn to current events and day-to-day chaos, just try to pause before reacting and making dramatic changes. Stay focused and plan accordingly.  

The opinions offered should be considered a part of your overall decision-making process. There is no assurance that any of the trends mentioned will continue in the future. Past performance is not indicative of future results. Information received from outside sources is believed to be credible but not guaranteed to be completeThe opinions expressed are those of the writer as of October 21, 2020, but not necessarily those of Raymond James and Associates, and subject to change at any time. Material is provided for informational purposes only and does not constitute recommendations, investment advice or an indication of trading intent.  

“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®, 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 239389-1041, email darcie.guerin@raymondjames.com. Website: www.raymondjames.com/Darcie. 


 

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