The Coronavirus outbreak has affected the lives of every single person on the planet. Economically speaking, it has had a unique effect as it has resulted in rapid market changes in a way that hasn’t really seen before. Most economic slowdowns unfold at much slower speeds and over a longer period of time. Events build on themselves as corporations cut back and start to lay off employees, markets begin to fall over weeks and months, and economic confidence slowly begins to erode. In this case, it basically happened overnight. The government flipped the switch and instituted a shutdown by ordering people to stay at home and non-essential businesses to close. It was fast and it was furious.
At this point, the government is eager to start transitioning from the current stay-at-home phase that is in place to some semblance of normalcy where the country can get the economy up and running again. While it is unknown how that is going to work exactly, some thoughts from HCR Wealth Advisors are that it could possibly occur in stages while the market remains vigilant about how the back-to-work phase proceeds. In the interim, the government has really stepped up and provided a lot of aid to those in need: small businesses and workers who have been laid off or furloughed.
One of the more popular programs is the SBA loans that are being rolled out. Specifically, these loans represent a $350 billion carve-out from a $2 trillion stimulus that is designated for small businesses. The aim of the loans is to bridge this gap in revenue that resulted from these businesses shutting down. In many cases, there are no revenues coming in, so the government aims to provide help to ensure companies remain solvent, and thereby are ready to be back in business when the appropriate time comes.
This is the largest stimulus package to be rolled in recent memory, even more so than the stimulus package that followed the 2008 financial crisis. There are a couple of things that are a little bit different about all the programs that are being instituted now compared with 2008. 2008 was marked by the great financial crisis, but it took a long time for Congress to get together and pass some of these bills. TARP was not passed until late-2008, and the first time the bill came to the floor, there was so much disagreement on it, which caused it to fail.
This shutdown and this recession are different because this did not happen because of any corporate malfeasance or anything that any companies or sectors did wrong. Rather, this was a health concern. It was caused by unforeseen circumstances and zero wrong-doing by any involved party, and the government decided it was necessary to act immediately in order to get its arms around the situation.
The bills that have been passed recently were passed in the first month of the shutdown, which is an unprecedented speed. As the country continues to see how the economy unfolds, HCR Wealth Advisors believes there will likely be a need for more aid, and it is a great sign that Congress has been willing to pass these bills quickly. The stimulus package also includes a record sum of money, as the fiscal stimulus plan consists of $2 trillion, which is about 10% of the nation’s GDP — a massive percentage.
BTIG, a firm that provides research and analysis, compiled every single country that has announced both fiscal and monetary stimulus measures. Their final number amounted to approximately $14 trillion worth of stimulus packages worldwide. On a total world GDP basis, that number accounts for about 15% of the global GDP. That is an incredibly large amount, and it is bigger than something such as the Marshall Plan, which was the effort to rebuild Europe after World War II.
In other words, governments around the world are putting together massive sums of money into the system to keep the global economy from grinding to a crippling halt. Previous instances of similar stimulus packages have demonstrated that while it does take some time for these programs to have an effect, they absolutely help set the floor and provide a tailwind for recovery when the economy regains its footing and markets start to turn up once again. HCR hopes to see that trend at some point in the near future. Overall, however, the firm is preparing its clients as if things should continue to worsen for the time being.
The team at HCR Wealth Advisors continues to monitor COVID-19 data points moving forward, specifically looking for a peak in cases, a ramp-up in testing, any seasonal weather patterns that might emerge and affect the spread of the virus, as well as any progress on the antiviral/vaccine front. Overall, educating their investors on the need to remain cognizant of the fact that market bottoms are a process is of paramount importance to HCR. It takes time to work themselves out and therefore requires patience as they wait to get back into investing again. It is easy to fall into panic as we see the updates every minute, hour, and day, but as any investment strategist will tell you, the markets are a long game.
About HCR Wealth
Known for its client-centered approach, a strong commitment to the individuals they serve along with a fee structure that is transparent, and thereby yielding objective and ideal financial outcomes, HCR Wealth Advisors is a Los Angeles-based wealth and investment advisory firm established in 1988. Its portfolio of services includes financial and estate planning, investment, risk and cash management, tax strategies, philanthropy as well as value-added services such as a trusted network, through leadership, business consulting and custom need-based services.
The firm’s group of advisors is equipped with a wealth of investment and finance expertise, and each team member contributes to the firm’s mission of keeping its clients first while helping them achieve their financial and life goals. They do this while remaining cognizant of each of their client’s unique lifestyle and personal preference.
In addition to a devoted team of advisors and a curated client-first approach, HCR Wealth Advisors sets itself apart on a few different accounts. The firm does not receive any type of fees or financial
considerations from mutual fund companies or money managers. And furthermore, it does not rely on proprietary products as it offers its clients proprietary strategies and objective guidance.
*This article is for informational purposes only and should not be considered investment advice.