How COV-19 Aftermath Affects You and Your Money

Unless you’ve been living under a rock, you’ve probably heard of the corona virus. No, it didn’t come from the beer. In fact, if I were the brewer, I’d have a slick marketing campaign ready-to-go once the United States is back open for business. This isn’t a post about testing requirements, social distancing, wearing a mask in public, politics (a whole other can-of-worms), quarantines, vaccines, or the effect on human interaction. It’s about how it affects you economically.

First and foremost, the longer the economic shutdown lasts, the worse for you and me. What’s the point of potentially not getting the virus if you’ve lost your job, can’t pay your bills, or buy food. Here are a couple of things that may interest you.

Industry

Brick & Mortar Stores were already in trouble, but the virus will likely put the final nail in many coffins. Consumers are switching to online options, and that will surely continue. Companies like Amazon and Overstock.com will see their market shares increase.

It will take a while for the airlines to come back. In fact, many experts are predicting that at least one major carrier won’t. However, if you are one of those who aren’t afraid to return to your former life, you will get great deals over the next couple of years. From an investing standpoint, most are trading 30% of their January close. It you are patient, there is some good buying opportunities out there.

The travel is highly correlated to the airline industry. It will likely take many months for the masses to feel safe enough to venture out of their safe-spaces. Again, if you aren’t one of those, you can get great deals. An added bonus is you’ll likely encounter fewer crowds in popular destinations. From an investment perspective, some industries that are cheap right now (relative to their January closes) are hotels and cruise lines.

Business Activity is the key to the economic recovery. As stated earlier, the sooner the better. In fact, how business activity returns will be the dominant issue in the upcoming presidential election. One of the most notable things about this pandemic is the ability of American businesses to work remotely. Video conferencing companies like Zoom (you know you’re big when you become a verb), and Go-to-meeting will surely change how business is conducted. What will be interesting to see is the effect on commercial real estate. Many companies may just decide to stay remote and reduce that huge real estate cost. In fact, Twitter has announced it will operate 100% remotely. On-line business in general should become the new norm. Businesses like electronic payments systems (Paypal & Venmo), on-line gaming, on-line groceries, streaming services like Netflix and Hulu, all should see significant growth in market share. If e-commerce wasn’t the wave of the future, it surely is now.

One of the prominent issues from this pandemic is how much we outsource our manufacturing capabilities, particularly to China. It remains to be seen if any manufacturing returns to the USA. What you have to understand is why it went there in the first place. The answer is because they had a comparative advantage, meaning they can make things cheaper than we can. Manufacturers aren’t going to increase their cost of production because of public scrutiny or patriotism. If anything, manufacturing will just move to another low cost producer, like India. The bigger impact will be in services and the gig economy. Services are likely to return slowly. It will take a while for consumers to feel comfortable exposing themselves to risk, unless there is a vaccine in the near future, which is highly unlikely. The gig economy could be a beneficiary. A gig is a onetime job, taken from the music industry where a band plays a “gig”, meaning one show and then they move on to the next. The gig economy is basically made up of independent contractors providing a one-time service, or recurring in some instances. Companies like this because of the lower payroll costs. Keep an eye on this. It is entirely possible that companies eliminate permanent positions in exchange for this cheaper alternative.

Taxes

One thing you can be certain of when this is over is your taxes will go up. My taxes will go up. Everyone’s taxes will go up. The government just spent $5 trillion, which it does not have as evidenced by the $25 trillion it already owes. Many of you may brush off the amount of the national debt since how would someone ever collect. Don’t be foolish in this thought process. The U.S. government will never default, because of credibility and its future need for cash. Plus, the approximately $500 billion annual interest payments are real. They are quickly reaching defense and entitlement (Social Security, Medicare, and Medicaid) status in terms of budget allocations. They have to pay for this spending somehow. That somehow is you and me. It is just an economic reality so be prepared. These new costs to the economy reduce economic growth and advancement opportunities for workers like you and me. Businesses will be looking for ways to pass these on.

Conclusion

The United States has faced many challenges in its 200+ year’s existence. We will overcome this one as well. However, it will come at a cost in how we conduct business and proceed with our daily lives in the future. We will see some markets go the way of the dinosaur, and new ones pop up and replace them. It will be up to you to acquire the skills necessary to meet these new market demands and job requirements. Build your skillset, particularly in the areas of science and mathematics. Take care of your health, including physical, mental, and spiritual. The new America will need a new type of citizen. Will you be one of them?