Well here we are at the end of July and Congress has failed to act so the supplemental unemployment program which is providing an extra $600 a week has ended. I am sure eventually they will work out a deal of some kind but it’s just sickening to me that even in a time of national crisis, politicians cannot do what they are elected and paid to do – work for the good of the American people. There are no easy answers to this situation and there needs to be discussion and compromise, instead one side wants to simply kick the can down the road and the other has an all or nothing mentality. Both sides are attempting to add in their own little pet projects that are not pertinent to the current situation. Meanwhile hard-working everyday Americans will suffer, and it will not just be those that are unemployed. This is money that will no longer be spent on necessities like groceries, rent, utilities, as well as discretionary items, like eating out, home improvements, shopping etc. All these businesses have owners, employees, suppliers, and more that will all be negatively affected by this stimulus being removed from the economy.
Obviously, we are not cruising into this at a time of economic strength, in fact it’s at a historic low. US Gross domestic product (GDP), the total value of goods and services produced, declined by a 32.9% annualized rate during the second quarter. For comparison, the economy contracted 8.4% in the fourth quarter of 2008 during the Great Recession. So economic output is 4 times less that that period! The reasons for this huge contraction are clear, an economic shut down stops economic activity and the solution is to provide continued economic support, not playing politics with each side blaming the other.
Meanwhile the stock market, which is not the economy (borrowed from Kai Ryssdal on “Marketplace”) has had a huge rally. The S&P 500 Index was up 20.5% for the 2nd Quarter 2020. The stock market is forward looking so people and institutions are hopeful that the worst is behind us, although new daily infections and rolled back re-openings across parts of the country may continue to temper some of that enthusiasm. More of the “real time’ data that many economists are heavily utilizing these days, seem to confirm an economic recovery that is potentially stalling. Some of these data points include, Apple Map requests, commuting activities, TSA reports on airport activity, dining activity from OpenTable which are all trending lower over the last few weeks.
What does it all mean for you and your family? The answer to that will vary greatly from family to family. Being prepared is about having a personal, custom designed plan for you and your loved ones and being prepared to do whatever it takes (even if it means blowing the whole plan up) to get through this and the next calamity that life throws at you. It is about being flexible, agile but also under control and measured in your response. Maybe it means taking a second job, refinancing a mortgage, taking out a loan, reducing spending/savings or updating your estate plans. Maybe you are in the enviable position of being able to take on some risk and finally moving forward with that idea you have had for years for a business that could thrive in this environment. Just know that you are prepared to take on any challenge, no matter how daunting, if you are just willing to take the first step.
*The opinions voiced in this material are for general information only. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Photo by Andy Feliciotti on Unsplash