COVID-19: Perspective on Four Common Investor Concerns
As COVID-19 spreads across the globe, investors are anxious about the economic, social, and geopolitical ramifications of the pandemic. Rapidly evolving domestic policy, a devastated job market, and a flailing stock market make it difficult to formulate any logical financial strategy. Here are four of the biggest investor concerns, and how to see them in a more positive light:
Government Policies: An election year always brings investor uncertainty, and by January, the 2020 election had already stirred up an unconventional level of polarity between the two major parties. Surprisingly, the two parties came together to support the US citizens against COVID-19.
The economic stimulus package includes major cash injections for businesses and individuals, including those who own investment property. With such a strong wave of support from the government, the sensible approach is to stay the course regarding long-term investments.
Interest Rates: The Federal Reserve has lowered interest rates to nearly zero in an effort to stimulate the economy and financial markets. Obviously, this is an extraordinary measure and investors are uncertain of how to calculate the long term benefits.
The low interest rates provide a rare opportunity for investors. Consumers have extremely high purchasing power, as well as negotiation tools for their line of credit, mortgage, and traditional credit card products. Ultimately, the low rates enhance cash on cash returns for real estate investments.
Volatile Stock Market: By the end of 2019, investors were beginning to think things were too good to be true. COVID-19 sped the market past the anticipated correction to a stock market plunge of historic lows. While most people panicked and liquidated their stocks, seasoned investors recognize this as an opportunity.
Buying well known, blue-chip investments at a discount in current market conditions will bring significant returns in the future. Additionally, take this opportunity to consider your asset class mix and rebalance to avoid inadvertently exposing your portfolio to unnecessary risk.
Limited Business Activity: Most people are hunkering down in their homes and practicing social distancing in an effort to flatten the curve. Consumer spending has decreased markedly, and unemployment is at an all-time high with many businesses closing their doors.
Shop Small has taken on a whole new meaning as many are logging online to support local shops. Many businesses are offering online versions of their services or gift cards to keep cash flowing. With businesses and consumers more engaged and responsive than ever, this economic contraction does not necessarily spell prolonged damage to the economy.
Amidst the still growing COVID-19 pandemic, investors are facing a new reality when it comes to finance and investing. But we have weathered storms before. It is crucial to be proactive and maintain control of your financial situation while navigating the rough road ahead. Most importantly, don’t lose perspective. Keep an eye on the positive effects produced by the united consumer community, and by our responsive government.