1st Quarter 2021
The Race Is On – George Jones, 1964
When Jones wrote his hit in 1964, and since covered by many bands, his was referring to love lost in the race for a women’s affection. This race will be played out between vaccination and virus variants, COVID fatigue and vaccine hesitation. As we write, COVID fatigue is real and fostering mini surges as more virulent variants from the UK, South Africa and Brazil establish significant beachheads.
One Year On
One year ago, as the highways were largely empty, we poled market strategists, scientists, and policy experts for forecasts as to how this crisis might unfold. We discarded the doomsayers and the optimists and focused on the middle ground. What we found was cautious optimism:
· Healthcare Crisis – Most felt that this would not morph into a financial crisis. This was based significant fiscal response from the Congress that would provide a safety net to those affected. While there was suffering, large scale tragic consequences were avoided.
· Vaccines – With the RNA of the virus released to global scientists in early January of 2020, the idea of a vaccine within a year was possible. Further, coronaviruses are known in epidemiology and have been studied for decades.
· Combining the two points above, there was a decent probability that the crisis would be short-lived. Unlike the financial crisis where many of those who lost employment needed to retool and acquire new skills, this crisis appears to involve more temporary job losses. While this crisis would be very tragic, many would be able to re-enter the workforce with little additional training.
Again, as we attempt to discern what the next one to two years may look like, we lean on experts with moderate viewpoints. As we stated a year ago, there still is an expectation that the economy to begin to normalize in the second half of 2021 and culminate in 2022. Like 9/11, normal may not look like the pre-pandemic life of 2019 but entail similar additional inconveniences that we will slowly accept into everyday life.
With Europe approximately three months behind us in vaccinations and emerging markets considerably more, forecasters expect the global economy to continue to strengthen as other parts of the world emerge from their shutdowns. This may allow growth to continue through 2022 and into 2023.
As stated above, the jobs lost during pandemic and the lives impacted were tragic. There are still approximately 7-8 million jobs that need to be created; 4 million to get back to pre-pandemic unemployment levels and 4 more to reemploy those who left the workforce altogether. Obviously, many changes occurred in the past year with new technological solutions to business models, but sometimes “the more things change, the more they remain the same.”
The main risks to this forecast are the virus itself and inflation. The more the virus remains active, the more opportunity it has to mutate and become more dangerous or resistant to current vaccines. Second, if we reach full employment by year end and labor markets tighten, there is a risk that inflation may be higher than expected forcing interest rates higher. Currently, these risks remain balanced.
We Are Here, Virtually but Soon Face-to-Face
While we are still not meeting with clients face-to-face, we are looking forward to in person meetings in the near future. In the meantime, please do not hesitate to contact us with any questions regarding your account. We can video conference and share screens.
Further, if your financial circumstances have changed, please call the office to set up an appointment to review your plan. We thank you very much for the trust you have placed in our firm.
Shoreline Financial Advisors, LLC