It is becoming more evident each month that our world may never be the same as it was a mere two years ago. The arrival of the COVID 19 virus and its mutation into the Delta virus and most recently Omicron seem to take us back one step for each that we’ve moved forward. Although science and the pharmaceutical companies will most likely provide vaccine protocols to eventually reduce the danger of this virus to flu-like statistics, the way many of us work and live has changed forever. Stay at home schooling, working from home, restricted traveling and entertainment all have taken their toll on us as social human beings. On the other hand, the popularity of Zoom meetings online as well as online education courses have allowed us more free time in our daily lives to pursue other interests and family time.
This time at home provided the opportunity for many to reassess their work and home lives as to what really matters most. Government stimulus money was mailed in the thousands of dollars to help those affected by layoffs for work shutdowns as virus cases peaked last year into this year. As vaccinations begin to bring down new cases of the viruses, businesses began reopening and workers being called back to work were not so sure they wanted to go back.
Currently there are approximately 7 1/2 million unemployed Americans and over 11 million job openings. While there are many explanations for why jobs are not being filled, it may just be that many experienced a timeout during the pandemic and decided to reorient their lives and put less emphasis on work.
This pandemic has changed the personal lives as discussed, but also substantially altered the major economies and manufacturing across the globe. Initially as economic lockdowns became widespread, businesses shut down and workers were sent home. The entertainment and travel related business ground to a halt. Substantial revenue was lost and many closed doors never to reopen.
As in past crises, there comes opportunity and the technology sector did not waste the opportunity. It brought us Zoom and Internet meeting sites, digital signature applications, and online delivery services from every establishment from clothing stores to groceries and prescriptions.
The historically quick development and disbursement of vaccines helped the world begin to return to normal life and also the major world banks held interest rates near zero to help affected economies get back on their feet. Very low or no interest earned on savings accounts or bonds over this time frame left no competition for stocks. Individual stocks along with major indexes have achieved record returns from the major decline in March 2020. Initially the tech and biotech sectors benefited in the race for vaccines and stay-at-home mandates. As the COVID cases slowed and consumers ventured back out to normal habits, the travel and entertainment sectors jumped into the lead. The results over the past 20 months have been quite amazing. Yet many investors have been on the sidelines waiting for the other shoe to drop.
Recently, individual investors and pros alike have gone on a selling spree especially in the technology and small company sectors. It seems that the recent discovery in Africa of a new virus mutation called Omicron has investors thinking the worst and taken a “sell now and ask questions later” approach. This action caused large declines in all sectors including precious metals, oil and crypto currencies as a “risk off” attitude prevails. Uncertainty confuses and rattles markets.
If you add current supply chain constraints affecting almost all consumer products and the latest saber rattling from both China and Russia, the economic uncertainty can be more than some investors can take.
While current market valuations are at some of the highest levels in history, it is common knowledge that no one can predict with any certainty when the next major downturn will occur. Over the past couple of years, we’ve witnessed more of a rotation between various investment sectors versus corrections in the overall market. Who is to say this will not continue?
Investor sentiment has fallen considerably in the past couple of months and the majority are now quite fearful of lower prices as evidenced in their selling all of their risk assets across the board. If you take a contrarian approach to the decisions of the general investing public, which has been quite successful in the past, this could prove to be an opportune time to purchase what they are selling.
It is said that markets climb a “wall of worry” and if the current worries have you doubting your investment strategy and long-term goals, you may need to revisit those goals and your overall risk tolerance. There’s nothing wrong with changing a risk strategy if your appetite for said risk changes as your personal situation changes. There is no one-size-fits-all investment strategy.
As we have experienced over the past couple of years there are unlimited factors that can, in our world, affect economies and thus the investment landscape. As a result, markets rise and markets fall. New companies are formed and others fail. What we can expect though are exciting investment opportunities to come our way.
Is it so crazy to believe that the next decade will produce investment gains even greater than what we have experienced from the current list of companies born in the internet and dotcom days? If we just look around at the possible potential of crypto currencies, artificial intelligence, electric vehicles, 3-D printing, genomics, space exploration and even cannabis, the future is very exciting.
Current world challenges will be solved and new hurdles will appear, but if we continue to be smart and manage risk and continue to be optimistic about the future and research opportunities as they become available, we can put ourselves in a good position to grow our assets.
The entire Lesjak Planning team thanks you for your trust and wish you a healthy and happy Holiday Season and New Year!