We’re in a strange place. Imagine you’re on a road trip in the old days before GPS. Your significant other is driving, approaches a fork in the road and asks you “which way do I go?” Your key job as navigator is to read the roadmap and stay on course, but it’s foggy and you’re unsure of where you’re at.
That foggy place is not unlike where we’re at today. It’s a week after Election Day, thirteen states are still counting ballots or have run-off elections, and there are election disputes. Also, the entire world is anxious for approval and distribution of COVID-19 vaccines. Although the polls have closed and there’s apparent success for Pfizer’s COVID-19 vaccine, we continue to be in uncertain times. I’ll share some recent insights from Dr. David Kelly, Chief Global Strategist and Head of the Global Market Insights Strategy Team for J.P. Morgan Asset Management as well as some sage financial planning considerations for the next few weeks.
The pandemic slows economic recovery. People want to get back to normal. Some industries need more time to recover (leisure and entertainment, travel and restaurants). Vaccines can dampen the pandemic and there are 11 in Phase 3 trials. (Note: It normally takes up to a decade for the development of a vaccine. The quickest was the mumps vaccine which took about 4 years and launched in 1967). The first might be available by end of this month, bulk distribution is expected the first half of 2021, and the U.S. economy is expected to accelerate.
Divided government should bring a modest fiscal stimulus and limited to overall policy change. Currently it appears Biden is President-elect, there will be a Democratic House and Republican Senate. It may be harder for a party to force policies through the system and instead, compromise is needed – which may be good medicine for a divided America. Thus, tax increases and fiscal stimulus might be more modest. The Congressional Budget Office estimates a budget deficit of $1.8 trillion without another stimulus bill. Hard decisions eventually need to be made (e.g. tax but don’t spend), but it appears unlikely for the near term.
There’s broad U.S. equity and bond indexes don’t look cheap; could be more opportunity in U.S. value and international equities. Expect long term rates to rise when the economy accelerates later in 2021 and Feds stop buying bonds (i.e. print money). Additionally, the U.S. dollar is expected to weaken.
What’s this all mean to investors?
It’s important to remember where you’re going. Back to Dr. Kelly’s map analogy – two things are needed to plot a course: current location and destination. The present location is cloudy – election outcomes, policies, pandemic. But a moth is drawn to a flame. Here’s what you should consider doing:
- Clarify your goals. What do you want your life to look like, what’s it going to take to maintain it (how much is needed), and when you do you want work to be optional (retirement date)?
- Hedge your bets. Life’s full of surprises. That’s why you lash yourself to the mast of diversification whether it be in your business, investment strategy or packing for vacation. It’s trading “not making a killing” for the blessing of “not getting killed.”
- Maintain your balance. Trainers push this concept in the gym. But it’s a good metaphor for life whether it’s doing things in moderation, actions have their consequences, and having others for feedback or to think things through.
As we come to the end of this road, I’d like to switch gears. How many times day do we face the question of “which way do I turn?” in our professional or personal lives? At Sage Financial Advisors, we’ve created a video series of interviews with successful professionals and thought leaders on business and life issues – we call it Sage Advice. Our first episode will be with Stephanie Kruse, founder and chair of KPS3 Marketing. We discuss life, planning for retirement, aging, entrepreneurship, money, being a business owner, charitable giving, and more. More information about how to watch is available on our social media channels and website.
While the paths following the elections and pandemic still have yet to illuminated, there’s light at the end of the tunnel. I encourage you to seek some sage advice and secure your future wisely.
This article can also be viewed at the Reno Gazette Journal.