Category: Blog

Why Sequence of Returns Risk Matters Now

3 min read

Sequence of Returns RiskThat year or two when you are closing in on your retirement date, followed by a year or two after you retire, are the worst times for a sustained market decline. Market analysts call this scenario the sequence of returns (SOR) risk – because once your principal has been significantly reduced, there’s not enough time in the market left for you to recover those losses.

Two things will likely happen. First, the amount of retirement income you can withdraw each year is irrevocably reduced. For example, if you were planning to withdraw 4 percent a year from a $350,000 portfolio, you would have received a supplementary income of $14,000 a year. But if your principal drops to $280,000 a year, your 4 percent draw will generate only $11,200 a year. If you need that additional money, you will have to increase your draw to about 5 percent of the principal each year.

This leads us to the second consequence of a market decline: your principal will diminish faster. The longer you live, the greater your chances of running out of money.

How Big Is This Problem?

Because the coronavirus pandemic has sent stock markets reeling over the past few months, SOR risk has become a widespread concern. According to research by Spectrem Group, at the end of 2019, there were 11 million millionaires in the United States. By the end of March this year, at least half a million of those people were no longer millionaires.

While losses among millionaires may be disconcerting, the situation is far direr for middle-class investors, who might not have several hundred thousand dollars to spare in their retirement portfolio.

Strategies To Offset SOR Risk

If the last recession is any indicator, the economic recovery going forward could take several years. That’s not good news for people who were looking forward to retirement. This group may want to seriously consider the merits of delaying retirement and continuing to work longer, such as:

  • Allowing their portfolio time to recover
  • Continuing to contribute to tax-advantaged retirement accounts
  • Enabling their Social Security benefits to accrue higher

Another strategy to help protect your portfolio against future SOR risk is to position a larger allocation to fixed-income assets and/or an annuity. While this might limit your potential for income growth in the future, these assets are backed by more reliable payors and less subject to the vagaries of the stock market. By diversifying your current assets, you can build multiple streams of reliable income to protect you from the future threat of market losses, a global pandemic, or changes in Social Security benefits.

It’s worth considering that once we emerge from this current crisis, legislators will have to find a way to deal with the federal deficit and growing debt. The Social Security program was already projected to cut benefits by 2035 without any new funding solutions. Now, that threat is even further exacerbated by the enormous jump in unemployment numbers. This situation leaves even fewer people paying into the Social Security and Medicare programs.

All of this is why it’s very important to address today’s challenges presented by the sequence of returns risk. Explore ways to develop multiple income streams to protect your current assets and ensure they last throughout your lifetime.

How to Stay Productive When Working from Home

4 min read

How to Stay Productive When Working from HomeDue to the unprecedented effects of COVID-19, the line between our professional and personal lives has blurred. Trying to take care of job responsibilities from home requires new ways of navigating. Here are a few ideas to help you become more productive while working at home – and stay grounded in these uncertain times.

Dress for Work

As tempting as it might be to stay in your pajamas, don’t. Act as if you’re going into the office: shower put on your work clothes and head to your desk. You’ll feel more focused and professional. According to Heather Yurovsky, founder of Shatter & Shine, one should not underestimate the power of putting on clothes suitable for public viewing. “It makes you feel human, confident and helps draw the line between being at home and being at work,” she says.

Create a Dedicated Space

While working from the kitchen table or couch in your living room might be more comfortable, it also might prohibit your productivity. Set up a home office. Get an extra monitor. Make sure you have dependable internet service. In short, replicate a professional workspace as best you can; one that feels separate from the rest of your home. When your surroundings are more in line with a real office, you’ll be more motivated. Plus, you’ll be able to more easily turn on when your day begins and turn off when it’s over.

Set Up a Plan for the Kids

Even though school’s out, chances are you still have to work. Create a schedule for the kids. Carve out certain hours for activities in designated areas of the house. According to Emily Weinmann of Us Happy Four, one of the best ways to keep the little ones occupied and happy is to prepare activity stations. Another great idea is to prepare snacks the night before and put them in your office, in the fridge or in their rooms. When someone is starving, the snacks will be ready. And finally, relax screen time. When you’re stuck at home and it’s either raining or it’s scalding hot outside, you’ll be grateful for technology.

Keep Regular Hours

If you stick with regular hours, you’ll not only be able to seamlessly transition going back into the office, you’ll also be on the same schedule as your colleagues. Everyone will be working concurrently, so you’ll be more efficient, easier to reach, and productive. When lunchtime comes, leave your home office and eat in the kitchen, the patio, or the backyard. Even though you’re in one place, the simple change of venue will be mentally refreshing.

Set Clear Boundaries

This is especially important if you have other humans in your home. Try your best to discourage intrusions. When you’re in a meeting, shut the door. Lock it if you have to. If your home is more open, put signs in strategic places where people frequent, like the entry to the kitchen or stairs to the basement. This way, they’ll pause and reflect on whether an interruption is really necessary.

Limit Your Intake of News

In a society that’s saturated with news at every turn, it’s tough not to get sucked into the latest tragedy. Be intentional: Turn off the TV during work hours. Don’t visit news sites when you’re at the computer or on your phone. If you feel you must have a bit of news to break up your day, tune in for a few minutes during lunch or in the evening. But even then, be judicious and limit your time. If some story sends you over the edge, turn it off and head outside for a walk. Change the channel. Put on your favorite music.

These days, we’re all doing the best we can, taking life one day at a time. Unless you already work from home or have made a decision that you’ll work from home for the rest of your life, remember that things will change.

Sources

https://www.themuse.com/advice/coronavirus-work-from-home-tips

https://www.forbes.com/sites/bryanrobinson/2020/03/14/9-tips-to-be-productive-when-working-at-home-during-covid-19/#2af81a845a38

https://www.todaysparent.com/family/family-life/working-from-home-with-kids-coronavirus/

How IT Spending Will Change When Business Resumes

4 min read

How IT Spending Will Change When Business ResumesMost states are starting to relax stay-at-home restrictions. As such, businesses are developing plans for bringing employees back to work. Many businesses are already affected by the pandemic and their future looks grim. Specifically, we are going to look at the IT sector and examine what spending might look like in a post-lockdown economy.

Disruption

The COVID-19 pandemic has resulted in an unprecedented disruption in businesses. As a result, management has tried to reduce costs to survive or risk shutting down. IT departments have suffered the most with major budget cuts due to a reduction in revenue. As a result, non-urgent purchases have been eliminated; initiatives have been suspended; and employees have been terminated.

Of course, technology also has been playing a great role in supporting businesses during the pandemic, especially by enabling work at home and keeping in touch with clients. But there are expectations for major challenges when businesses get back to normal. For instance, the post-coronavirus business world expects travel restrictions, office distancing, business continuity, and pandemic regulations. As for onsite work in the office, challenges will include distributed collaboration, endpoint data protection, scalable administration, and secure access to corporate data.

It also appears that the impact will vary from industry to industry. Companies that depend on face-to-face contact are in danger of lost income and bankruptcy. At the same time, other businesses are thriving.

Consider digital marketing industries. With more businesses moving online, there will be a rise in the purchase of IT-related expenditures such as software. The entertainment sector has found solace in digital platforms, while there is an increase in the work-at-home trend.

The Future

Despite the uncertainties, some predictions can be made.

One thing that is certain is that the impact on IT spending will vary depending on the IT stack. While the infrastructure, branch networking, middleware, and enterprise apps might see a drop, areas such as communication/collaboration, cloud storage, security, and compliance will likely see an increase in spending as more people work remotely.

While the impact on the IT industry will definitely vary, we could see a lot of new innovations. Such innovations might include customer-facing and worker productivity apps. Some companies may increase spending on new innovations to help outperform their competition.

Another factor affecting IT spending is the size of a business. While big businesses may get back to normal after a few months, small businesses have to tread carefully. As such, IT spending for different-sized businesses will not be similar.

A decision to have employees continue working at home means that IT expenditures will take a different shape. While there will be less need for office equipment, there will be an increase in spending to enable offsite work.

There could also be more spending by businesses investing in continuity strategies such as more remote locations, new training in information and communications technology (ICT) and automation of processes.

This also will depend on business operations. Consider a business that had already migrated to the cloud before the COVID-19 pandemic. Such businesses did not suffer much disruption compared to those still using on-premise applications and proprietary data centers. Thus, IT spending for both types of businesses will vary in the future.

Lastly, businesses will want to invest in projects that are likely to provide a return on investment faster.

Conclusion

The disruption to businesses by the COVID-19 pandemic is like none previously encountered. One thing is certain: Things will not bounce back to the known normal. Rather, we should expect a new normal. And, as we have seen through the examination of certain IT expenditures, the success of each industry is dependent on various factors.

In the Wake of the Coronavirus Pandemic, Congress Passes the Most Expensive Single Spending Bill in American History

HR 266, HR 4771, S 3607, S 2746, HR 6800

3 min read

Paycheck Protection Program and Health Care Enhancement Act (HR 266) – This is a multilayered legislative bill divided into four distinct sections. Phase 1 authorized funding for coronavirus preparedness and response; specifically, for measures such as vaccine development and public health funding. Most of the money was allocated to the Department of Health and Human Services. Approximately 81 percent of funds were allocated domestically, with the other 19 percent allocated internationally.

In the Wake of the Coronavirus Pandemic, Congress Passes the Most Expensive Single Spending Bill in American HistoryPhase 2 allocated $104 billion for three specific objectives: 1) Require private health insurance plans and Medicare to cover COVID-19 testing; 2) Expand unemployment insurance by $1 billion and loosen up eligibility requirements; 3) Provide for paid sick leave at an employee’s full salary, up to $511 per day, and paid family leave at two-thirds of a worker’s usual salary.

Phase 3 provided stimulus checks to individuals and “grants” to small businesses meeting specific criteria, such as keeping employees on the payroll for two months. This phase of the bill represents by far the most expensive single spending bill ever enacted in American history, at about $2.2 trillion.

And finally, the last phase of the bill provided funding to replenish the Paycheck Protection Program (PPP) for small businesses and shore up public health measures, such as virus testing and hospital funding. The bill was signed into law by the president on April 24.

VA Tele-Hearing Modernization Act (HR 4771) – This bill amended previous guidelines to allow appellants to appear in cases before the Board of Veterans’ Appeals by picture and voice transmission from locations outside the Department of Veterans Affairs. The bill was introduced by Rep. Joe Cunningham (D-SC) on Oct. 21, 2019, and signed into law by the president on April 10.

Safeguarding America’s First Responders Act of 2020 (S 3607) – Sponsored by Sen. Chuck Grassley (R-IA), this bill was introduced on May 5 and passed in the Senate on May 14. The legislation is designed to extend death benefits to public safety officers whose deaths are caused by COVID-19, and for other purposes. The bill is currently under consideration in the House.

Law Enforcement Suicide Data Collection Act (S 2746) – Sen. Catherine Cortez Masto (D-NV) introduced this legislation on Oct. 30, 2019. The act would require the director of the FBI to provide information on suicide rates in law enforcement, and for other purposes. It was passed in the Senate on May 14 and is currently being considered by the House.

HEROES Act (HR 6800) – This bill was introduced on May 12 by Rep. Nita Lowey (D-NY). In response to the COVID-19 outbreak, this bill is designed to provide emergency supplemental appropriations for a variety of applications, including assistance to state, local, tribal and territorial governments; further, expand paid sick days, family and medical leave; unemployment compensation; nutrition and food assistance programs; housing assistance; payments to farmers; and the Paycheck Protection Program. It also outlines several potential tax credits and deductions and requires employers to develop and implement infectious disease exposure control plans. The House passed this bill on May 15; it is currently in the Senate for consideration.

COVID-19 Recovery Responses are Crucial for Companies to Thrive in the Future

4 min read

COVID-19 Recovery Responses are Crucial for Companies to Thrive in the FutureWith the coronavirus spreading across the globe, catching individuals and governments off guard, business owners have not fared any better. While the virus is having a grave impact on the health of millions across the globe, businesses have seen an equally serious impact on their bottom line. The virus is projected to hit businesses’ cash-flow and the ability to stay open post-pandemic.  

While different parts of the country have been hit harder than others, the nation’s businesses, their owners, and employees are all dependent on the national and global economy. Looking to those who have survived past crises, business owners are now tasked with guiding their organizations through the coronavirus pandemic.

Effective Attributes and Responses to Help with Recovery

Right now, more than ever, it is equally important that business owners empathize with their clients’ expectations and their employees’ needs while also taking steps to maintain their financial health.

Other attributes of effective business owners include making sound judgments in light of limited or incomplete data, along with providing a positive but realistic forecast of the situation to keep the employees motivated and productive. Lastly, leaders who see crises like the coronavirus as opportunities to identify trends for innovation and ways to problem solve can look to brighter days in the future.  

Protecting the Business’ Bottom-Line

Like other sustained business interruption events, there’s a three-pronged approach that businesses can implement to increase their chances of survival. The first is to manage the shock from the initial impact and establish a protocol for the new normal in order to preserve continuity. The next step is to learn from what has occurred and adapt to the way work is now being performed to serve clients as effectively as before. The final step is to identify future opportunities to operate differently, more efficiently, and gear up for the post-crisis new normal.  

To better mitigate major effects from a crisis and begin the adaptation process, the following are practical steps to emerge leaner and more efficient as the reopening process begins. Two primary actions that businesses must take is to first protect the well-being of workers, while also protecting the business financially.

  1. Making decisions should be streamlined because a lack of certainty can give decision-makers analysis paralysis. This can slow down important steps needing to be made faster than during non-crisis times. Moving from a chain of command to collaborative teams to make decisions can increase speed by having fewer steps and faster decision-making processes.
  2. Documenting all cash the business holds, along with committed and uncommitted lines of credit, also is suggested. Be sure to include lines that are pre-established with banks or credit unions, plus any existing borrowing limits from lenders; this will provide a baseline for businesses to make crisis projections. Other liquidity measures might be negotiating to extend better payment terms and refinancing existing lines of credit for better short-term payments, potential new equity injections, etc.
  3. Quickly modeling different economic outlooks for existing markets that are served, depending on how mild, moderate, or severe the crisis impacts that business, can provide greater insight on a business’ financials. As conditions change, it will become evident how much cash is needed and what areas of a business might need to be scaled back or cut. Leaders should also look at the likelihood of not being able to serve outstanding debt, primarily as they look at liquidity and the profitability of the business’ operations.
  4. Determine the business’ mission-critical business segments. This looks at which services or products are most profitable and/or resource-intensive. This will help determine which ones are important to current and future cash flow and which segments could be impacted based on the length and severity of the crisis.
  5. Evaluate what businesses can do to reduce non-essential or discretionary expenses to positively impact its finances. This can be accomplished by reducing or forgoing landscaping a business’ exterior or holding off on repainting a building. It can also come in the form of reducing one shift or reducing spending on employee training.  

Since the coronavirus is a fluid crisis and there are many possible outcomes, business owners will implement different practices based on how this crisis evolves. Depending on the severity of the actual impact, different products or services can be stopped temporarily, employees’ hours can be reduced or a hiring freeze can be implemented.

How Will U.S. Employment Figures, Coronavirus Impact Job Markets?

5 min read

How Will U.S. Employment Figures, Coronavirus Impact Job Markets?With the CARES Act (Coronavirus Aid, Relief and Economic Security) signed into law by President Trump on March 27, this set into motion major initiatives by the U.S. government in response to the coronavirus’ economic impact. This Act provides $2 trillion in financial aid to the nation, in big part to soften the impact of the coronavirus’ hit to the country’s unemployment numbers.

For the week ending April 11, seasonally adjusted jobless claims came in at 5,245,000, a drop of 1,370,000 from the April 9 revised level of 6,615,000, according to an April 16 news release from the U.S. Department of Labor.

For the week ending April 18, seasonally adjusted initial claims were reported at 4,427,000, or 810,000 fewer than the prior week’s revised level, according to an April 23 news release from the U.S. Department of Labor. April 11’s adjusted level was lowered by 8,000 to 5,237,000, down from the original 5,245,000 figure.

Taking into account the cumulative unemployment claims over the past five weeks, there have been approximately 26 million workers in the United States put out of work due to the coronavirus and the resulting economic downturn. With the employment picture facing a grim reality, the CARES Act provides many relief programs.

One part of the law provides financial relief for individuals, families, and businesses. Highlights include direct payments of $1,200 for individuals making up to $75,000, $112,000 for heads of households, and $150,000 for joint filers. Enhanced unemployment benefits also are included in the law to help those who are laid off, including contract workers.

Another way the CARES Act helps stimulate the economy is through the Paycheck Protection Program. Funded at $349 billion, this SBA-backed loan is designed to offer financial help to struggling businesses impacted by the coronavirus. A key aspect of this program is to give businesses enough money to pay at least eight weeks of payroll and related expenses to increase their chances of staying in business.

Factors for eligibility to apply for PPP loans include companies that are able to demonstrate their business has been reduced by Covid-19 and have less than 500 workers on their PPP application. Examples of eligible businesses/individuals include independently-owned franchises, contractors/self-employed individuals, tribal businesses, hotels, and restaurants. Eligible companies are able to have their loans forgiven, up to $10 million if they are borrowed from an SBA-approved 7(a) lender.  

According to the U.S. Department of the Treasury, loans may be forgivable if the following criteria are met. No less than 75 percent of the loan is to be used for payroll costs, at which payroll costs on a 12-month basis are maxed out at $100k. Other allowable loan funds, up to 25 percent of the loan proceeds, can be used to pay for rent, utilities or mortgage interest. However, if full-time staffing is reduced or if the salary is reduced by more than 25 percent for full-time employees making less than $100k per 2019’s salary, PPP borrowers may owe money back. However, if any disqualifying changes that occurred between Feb. 15 and April 16 are made whole by June 30, the loans can become re-eligible to be forgiven.

Economic Injury Disaster Loan

Another significant relief program the CARES Act provides in the way of economic relief is through the Economic Injury Disaster Loans program (EIDL). The EIDL program is generally for businesses with 500 or fewer employees, whereby the company can apply to borrow as much as $200k. Loans up to $25,000 require no collateral, and requests above $25,000 require only business assets to serve as collateral.

One significant provision of the EIDL is what’s referred to as the Economic Injury Disaster Loan Emergency Advance. This enables applicants of the EIDL to receive as much as $10,000 in relief that’s not required to be paid back, creating a de facto grant, per the U.S. Small Business Administration. Businesses can receive as much as $1,000 per employee, up to $10,000, based on the number of workers a business employs. Depending on how extensive a business has suffered economically, a maximum of $2 million can be borrowed by a business through EIDLs and/or physical disaster loans, according to the U.S. Small Business Administration.

With these and other domestic government stimulus programs, coupled with other countries implementing their own stimulus programs, it’s worth noting different potential outcomes depending on the pandemic’s severity and health mitigation factors. According to the Organization for Economic Cooperation and Development, the following are some forecasts on how Covid-19 is likely to impact the global economy:

  • While the coronavirus data from China has been questioned, the OECD says that assuming the infections from the coronavirus peak during Q1 in China, the world’s economy is expected to grow less than projected for 2020, dropping to 2.4 percent from 2.9 percent. And while China’s economy is expected to drop below 5 percent in 2020, the country is expected to exceed 6 percent growth in 2021.
  • The OECD also noted that with a pandemic lingering longer and with greater intensity throughout the Asia-Pacific region, North America and Europe, it projects worldwide growth to drop to 1.5 percent in 2020.

Only time will determine how much of an impact the coronavirus will have on global markets. Governments around the world will continue to do their part to mitigate negative impacts.

Be Right About Free Money: Potential Legal Risks of the Paycheck Protection Loan Program

3 min read

Paycheck Protection Loan ProgramOne of the most important provisions of the CARES Act for small businesses is called the Paycheck Protection Program (PPP). The PPP is a $349 billion program designed to assist small businesses (fewer than 500 employees) facing financial difficulties as a result of the COVID-19 pandemic through specifically structured loans.

The loan program offers funding to cover payroll for up to eight weeks, with the intent of stemming from unemployment. These loans can be forgiven and essentially become a grant if your business meets certain criteria with no need to repay the money.

As the old saying goes, there’s no such thing as a free lunch – or in this case, free government money. There are potential legal risks that could jeopardize the forgivability of the loan.

Conditional Grants

Another way to look at the PPP loans is as conditional grants. The U.S. Small Business Administration (SBA) notes that loans will be forgiven in full if the funds are used for appropriate costs. Covered costs include payroll, mortgage interest, rent, and utilities. Further, the payroll costs must account for at least 75 percent of the loan proceeds used. The employer needs to maintain or quickly rehire employees and maintain wage and salary levels in order to receive 100 percent forgiveness.

The Devil’s in the Certification Details

The loan application process requires certain certifications. Businesses that are still operating need to certify that the current economic uncertainty makes the loan necessary to keep operations going.

If this seems vague, it’s because it is. There probably isn’t a small business out there that is not facing significant uncertainty in the current climate. The problem is that the certification standard the PPP lays out is extremely subjective. As a result, with the encouragement for businesses to apply, many may do so under the impression that they will have their loan fully forgiven to only run into trouble later if they don’t meet the certification standards.

Legal Risks

By not providing any definition about the nature or extent of the required impact to operations that would make the loan request “necessary to support ongoing operations,” the SBA is making both applicants and lenders apprehensive.

Some law firms are even warning clients via their newsletters about potential legal exposure under the False Claims Act (FCA). Legal counsels are cautioning that a misrepresentation included in an application could result in FCA liability. Businesses must navigate between being as aggressive as possible to bolster their application while staying within the rules of the program.

More Certification Guidance is Needed

The government agencies involved need to provide more clear and objective guidance on the conditions needed to meet the certification requirements of the loan application process. Without clear and definable guidance as to what constitutes facing economic uncertainty, small businesses could face problems in the future.

Objective criteria such as a percentage of revenue decline or order capacity would provide a rather bright-line test and give both guidance to businesses and confidence in the process. 

Understanding the High-Low Method

3 min read

Cost Accounting High-Low MethodWhen it comes to cost accounting, the high-low method is an approach that’s used to break mixed costs into either a variable or fixed cost. Although it’s straightforward, it’s important to do multiple analyses because outlier costs from the available data can sometimes misconstrue operating costs. This calculation occurs by looking at the periods with the most and least activity, as well as the total costs for both the high and low periods.

In order to get results for the high-low method, the variable cost and the fixed cost must be determined first. Once these are established, they are entered into the cost model formula.

Variable Cost is determined as follows:

VC = Highest Activity Cost – Lowest Activity Cost / Highest Activity Units – Lowest Activity Units

The next step is to calculate the Fixed Cost as follows:

FC = Highest Activity Cost – (VC x Highest Activity Units)

Now that the fixed and variable costs are known, the high-low cost can be determined:

High-Low Cost Model = Fixed Cost + (Variable Cost x Unit Activity)

Understanding it Through a Real-World Example

Looking at a furniture manufacturer, it’s good to focus on one product to see how the high-low method works:

The first step is to list production that includes each month, the product produced (let’s say it’s tables), and how much it cost to produce all tables each month. The list could be as follows:

Months Units Produced Total Cost ($)
January 153 6,650
February 106 5,653
March 120 6,185
April 126 6,120
May 100 4,888
June 133 6,650
July 113 5,852
August 93 4,988
September 153 6,783
October 166 7,382
November 146 6,783
December 160 7,581

The greatest output or activity for the furniture store happened in October when it produced the highest number of tables: 166 at a cost of $7,382. In August, the furniture store produced the fewest number of tables at 93, manufactured at a cost of $4,988.

Even though the cost may not be the greatest for the peak and valley of production, the corresponding costs for those respective figures is what will be used.

Now that we’ve identified the relevant data, the first task is to determine the variable cost.

VC = Total Cost of High Activity – Total Cost of Low Activity / Highest Activity Unit – Lowest Activity Unit

VC = $7,382 – $4,988 / 166 – 93  

VC = $2,394 / 73 = $32.80 per table

Then fixed costs must be calculated:

Total Cost = (VC x Units Produced) + Total Fixed Cost

$7,382 = ($32.80 x 166) + TFC

$7,382 = $5,444.80 + TFC

TFC = $7,382 – $5,444.80 = $1,937.20

It’s important to remember that variable costs are per unit.

Now that we have the total fixed cost, we can then create the total cost equation:

Total Cost = Total Fixed Cost + (VC x Units Produced)

Total Cost = $1,937.20 + ($32.80 x 166) = $7,382

This demonstrates the comprehensive costs for the tables made by the furniture store.

Further Considerations

The high-low method is a quick way to analyze costs. Since it only necessitates the peak and lulls of production data and costs, it can be done more often, along with helping companies plan with limited data to estimate future unit costs.

It’s important to run multiple types of cost analysis because high and low measurements might not give a full picture of costs. Although these two data points may not be the best overall picture of costs a business experiences at those volume levels, it can be an effective measurement until more data becomes available.

Prospects for Investing in the 2020s

4 min read

Investing in the 2020The third decade of the 21st century started out with a vigorous economy, record low unemployment levels, and benign inflation. But late in the first quarter over the span of two weeks, investors faced the fastest stock market correction in history.

With an unpredictable assailant like a global virus, short-term actions by Congress and the Federal Reserve will need time to see if they are effective. Ultimately, the fate of the U.S. and global economies, which in turn will impact the investment markets, is dependent on how long the COVID-19 outbreak continues and if there is a second wave. Clearly, both supply and demand have been dramatically reduced, with a ripple effect on companies, workers, consumers, and investors. Once the crisis has passed, we will learn which sectors, industries, and individual companies remain financially viable with a business model built to sustain this unprecedented economic fallout.

Amid this backdrop, wealth managers must read the tea leaves to anticipate what the investment markets will look like post-coronavirus. The challenge is how to best position assets to take advantage of future gains without giving up ground now and turning paper losses into permanent shortfalls.

For individual investors, it comes down to what you want to accomplish in the next decade – or what your money can accomplish for you. Are you nearing retirement? Will you remain in the accumulation phase, wherein you can afford to take on market risk? Are you just starting out, and are you risk-averse due to the two major economic declines experienced in your relatively short life, or are you prepared to invest in future prospects – wherever they may lie?

Anyone already in or nearing retirement would do well to invest for a steady stream of income. While the DJIA initially took a beating, many blue-chip stalwarts continue to grow and payout dividends as they have long term, through thick and thin. However, pay attention here, as there are some long-standing dividend-paying companies that are starting to suspend or substantially cut dividend payments.

Growth-oriented investors would do well to look at companies that were well-positioned to survive the pandemic, because they may well represent commerce of the future. This includes the well-established FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google), which have become masters of fast and reliable delivery of online content and physical delivery of essential and discretionary products. Unfortunately, the stock prices of these companies have soared in recent years, so it’s time to consider what the “next big thing” in this arena will look like and who are the frontrunners.

With that in mind, take a look at 2020 demographics. Millennials recently surpassed Baby Boomers as the largest generation in the United States, but they aren’t expected to hold this mantle for long. Generation Z/Centennials are on track to enter the workforce in higher numbers during the next decade. This is a generation that has never known life without cell phones and the internet, so expect the technology sector to ramp up not just with consumer innovations, but with ways to help other industries enhance data management, blockchain supply chains, and artificial intelligence – which might become as omnipresent as retail strip malls.

In a post-pandemic world, employers seeking to strengthen their business models might come to embrace the idea of foregoing healthcare and other expensive benefits offered to employees. A subsequent world of higher pay and more public options could spur the growth of entrepreneurship and new small businesses. By taking advantage of remote employees, low overhead expenses, and emerging technologies, smaller companies or conglomerates might be able to compete with the likes of Amazon in both domestic and global markets.

As a short-term precaution, consider how you might defend your portfolio against the possibility of inflation as we stumble out of the pandemic economy. The federal government’s generous stimulus packages combined with a continued easing of monetary policy by the Federal Reserve could lead the United States to higher inflation. This could be exacerbated by the recent shutdown of production in many industries; the initial low supply of products also might contribute to price escalation. During this interim, investors may want to consider investing in commodities and Treasury Inflation-Protected Securities for inflation protection.

As always, it’s best to seek the advice of a professional in this ever-changing environment.

Six Industries Hiring During the Shutdown

3 min read

Six Industries Hiring During CoronaVirusDuring the government shutdown as a result of COVID-19, sadly, millions have lost their jobs. However, there is a silver lining: there are some industries that, because of the shutdown, are actually hiring. Here are a few leads to help those who might have been affected.

Shipping and Delivery

This industry is hiring at what seems like warp speed. It’s reported that Amazon has created 100,000 jobs, specifically for fulfillment and delivery. UPS is hiring, as are courier services. Search “courier services hiring near me” to find opportunities. You might be surprised by what you find.

National Retailers

In addition to Amazon, there are other giants that are hiring, including CVS, Kroger, and Walmart. See the entire list here. The National Retail Federation also has a good list, which includes GE Healthcare, The Home Depot, and Instacart (the latter is a big one, as many don’t want to darken the doors of grocery stores). Access everything here.

Online Learning Companies

Now that scores of kids are at home, teachers are in demand to assist with online learning. Outschool is hiring thousands of teachers. GetEducated is also a great resource for finding a list of companies that are looking for online teachers. And if you’ve always wanted to be a teacher, now’s a good time as any because you can earn online credentials. The world always needs great educators!

Remote Meeting and Communication Companies

Since many companies must conduct business remotely, outfits such as Zoom, Slack, and Microsoft Teams are hiring. Furthermore, since aspects of COVID-19 are still unfolding and may require a longer stint of working at home, these companies could be hiring for a good while, meaning this burst of openings might not be just a flash in the pan.

Childcare

Now that many parents are working from home, they still need childcare. Though our situation changes daily, the California governor announced that schools likely won’t open before fall. Think about opening up your home with affordable, flexible options. It could become a whole new business for you.

Healthcare

While this might not be the first choice for some, it is a sector that’s hiring, not surprisingly. According to an article on LinkedIn, healthcare job postings spiked 35 percent compared to just a few months before the shutdown. Demand is intense in New York and New Jersey. However, California, Florida, Texas, and Arizona are growth markets as well. Check out your local hospitals or freestanding care clinics.

Think Outside the Box

Right now during a pandemic, there’s no shame in taking a job for which you might not be a perfect fit, or even overqualified. Money is money. However, if you feel you need to learn skills for a particular job or if you want to learn something new just because, now is the time to do so. Want to learn to code? Try your hand at the GRE? Pick up an online credential? There’s no time like the present. Go for it!

Sources

https://www.themuse.com/advice/industries-hiring-during-coronavirus-outbreak

https://www.fastcompany.com/90478987/who-is-hiring-during-the-coronavirus-try-these-industries-if-you-need-a-job-now

https://wccoradio.radio.com/articles/radiocom/list-of-companies-hiring-during-the-covid-19-outbreak

https://www.forbes.com/sites/advisor/2020/03/31/websites-to-find-work-from-home-jobs-hiring-during-the-covid-19-crisis/#26d899d23c43

https://www.cnbc.com/2020/04/03/these-companies-are-hiring-right-now-even-amid-the-coronavirus-pandemic.html