Like prisoners etching their time served on their cell wall, my family has chosen our kitchen door jam to mark our social distancing efforts. Six weeks is approaching in just a couple of days. I must say, my long-held belief that April has only 30 days is faltering.
While I’m not an expert on the medical hurdles we’ll need to clear to safely “reopen” the economy, indications are that we’re still many weeks out. It may happen sooner, as a matter of choice, but it won’t necessarily mean we’ve satisfied the safety criteria. Regardless, it’s becoming clear to me our reopening will only feel moderately different than today. In fact, I’m expecting it to resemble a swinging door.
Unless you’ve successfully adopted the behavior of an ostrich by quickly stuffing your unopened March investment statements in a drawer, the stock market’s huge rebound might be a perfect moment to take a fresh look at your portfolio. Bear markets often provide investors a few short windows of opportunity to make long-neglected adjustments. Let your concern about your financial condition during the heart of last month’s decline be your guide to making possible changes now.
Financial markets have absorbed this Black Swan event with lightning speed. The market’s reaction has matched the trillions of dollars thrown out as a lifeline to businesses, households and investors. Right or wrong, policymakers’ vast power to save our financial system is seemingly unquestioned. However, the durability and sufficiency of these actions still remains an open question.
The unprecedented government support is likely not enough. Their solution has been a messy patchwork of enhanced unemployment benefits, forgivable loans to small businesses, cheap loans to larger businesses and small “stimulus” checks to millions of households. The money is just now arriving. Clearly, distributing vast sums of money is tough work. In a crisis, it never feels fast enough. The next phases of financial support that I expect to see in the months ahead will go much more smoothly. The templates of the various programs are being battle tested today.
With their programs, Congress and the Fed have helped to fill the immediate income and funding gaps at all levels. Nonetheless, they’ve realistically only bought the economy about two-to-four months of time. As we continue to grapple with the ongoing public health policy responses, we should expect negative follow-on impacts to the financial picture of hospitals, schools, municipalities and states. I anticipate a trifecta of program extensions, expansions and tweaks in the months ahead.
For a glimpse of our likely future, we should look to Singapore, Japan and South Korea. These countries have been held up as success stories for their ability to squelch their outbreaks. Now, after sustained periods of containment driven by advanced testing, tracking and tracing tools, each has reinitiated or extended their orders for their citizenry to isolate. Given this, even after we choose to reopen, we need to be aware of the swinging door. Otherwise, it just might hit us in the face.
Jason P. Tank, CFA is both the owner of Front Street Wealth Management, a purely fee-only advisory firm and the founder of the Money Series, a non-profit program committed to providing open-access to financial education, for all. Contact him at (231) 947-3775, by email at Jason@FrontStreet.com and at www.FrontStreet.com