Four-dimensional chess set | Opinion
“Life is meant to be lived and curiosity must be nurtured. You should never, under any circumstances, turn your back on life.” ~ Eleanor Roosevelt
Question: You said there will be “winners and losers” go in the fourth quarter of 2020 and beyond. Would you like to develop how different it iseconomy rts can recover?
Answer: Anticipating the future is a bit like playing chess and trying at predict your of the opponent some next moves. Add to that power exchanges in an effort to hopefully avoid any miscalculations, and you have a pretty good analogy of how today’s financial environments exist.
Monopoly, the game of lifeand 3D Morpion were some of my favorite childhood games that all required strategic thinking and planning. Forecasting expectations for financial, social and political markets is more like a four-dimensional chess game these days. Our grandchildren were just in town, and luckily, they still like to play board games with dad and Yaya. In addition to those already mentioned, Battleship is a family favorite Game. The last thing anyone wants to hear in reference to their wallet and financial plan is “You sank my battleship!” With that in mind, let’s take a look at all industry sectors as they may relate to the current environment.
As expected, different parts of the economy will recover at varying paces and magnitudes. In some ways, the recovery is at an impasse with industries such as hotels, airlines, restaurants and most hotels/leisure companies still plagued by so manysocial distancing protocols, ppsychological barriers and the actual permanent business closures already announced. Large-cap companies, particularly in technology, software, communication services, consumer discretionary and healthcare, have weathered the pandemic better overall than other areas. Chess players take the time to analyze the board, making sure the next move is the most advantageous, even if it’s not always the most obvious choice.
Of the eleven sectors, in the short term, political uncertainty could influence tendencies. Healthcare is an example of an area under the microscope as we sort out Supreme’s replacement court judge Ruth Bader and Ginsberg facing headwinds during the presidential election process. The technology could be challenged in the short term, but as we move forward, this area will likely benefit from permanent changes in the way we interact due to covid-19. Communication services and consumer discretionary are sectors that may fall into this same category.
As the economy recovers, areas to watch closely are materials, finance, industrials and consumer staples. As we are waiting to see if there will be another rise in COVID cases in Europe, US and worldwide, low–interest rates can help offset the impact of other economic headwinds.
During the shutdown, inventory levels declined due to a lack of production. Production is currently ramping up as the world restocks based on global manufacturing data. Typically, as manufacturing picks up, cyclical sectors strengthen. An example of this is our recent search for family bikes. The the economic theory of supply and demand influencing prices and consumption holds true in this category.
More uncertainty may remain for commercial real estate, particularly in the retail and office categories. How this might turn out in the future is uncertain, however., I remember a time before the internet and the cloud for data storage, when there was more demand for commercial space due to at the need for legal libraries and huge amounts of file space for documentation. Disturbance is usually followed by evolution, and we’re in the middle of that kind of cycle.
Most investors should seek diversity to balance risk versus reward. For this reason, even the less favored sectors can be suitable. As always, consult your team of trusted financial advisors to formulate a strategy tailored to your personal preferences, needs and goals. Observing trends in all three areas of major economic indicators, employment reports and inflation rates can help us navigate our way.
Whether it’s going back to work, getting something to eat, getting on a plane or attending a crowded sporting event, it seems many are hesitant to return. at their pre-COVID-19 activities. The psychological impact of the virus will likely impact these critical components of the US economy for the foreseeable future. Stay focused and plan accordingly.
There can be no assurance that the trends mentioned will continue or that the forecasts discussed will materialize. Past performance may not be indicative of future results. There is no guarantee that any such statements, opinions or forecasts provided herein will prove to be accurate. The opinions expressed are those from the writer to October 142020, but not necessarily those of Raymond James and Associates, and subject to change at any time. All information provided herein is for informational purposes only and is not intended to be, and should not be construed as, an offer, solicitation or recommendation to buy or sell or otherwise invest in any of the securities/ sectors/countries that can be mentioned. Investing involves risk and you can make a profit or loss regardless of the strategy you choose, including diversification and asset allocation.
“Certified Financial Planner Board of Standards Inc. holds the CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque) and CFP® (with flame) certification marks in the United States, which it awards to individuals who pass the CFP Board initial and ongoing certification requirements. This article was provided by Darcie Guerin, CFP®, Senior Vice President, Investments and Branch Manager of Raymond James & Associates, Inc. Member New York Stock Exchange/SIPC 606 Bald Eagle Dr. Suite 401, Marco Island, FL 34145 She can be reached at 239–389-1041, email [email protected]. Website: www.raymondjames.com/Darcie.