Four-dimensional chess game | Opinion columnists
“Life was meant to be lived, and curiosity should be kept alive. You should never, for whatever reason, turn your back on life. “ ~ Eleanor Roosevelt
Question: You said there would be “winners and losers” go in the fourth quarter of 2020 and beyond. Would you like to develop how different parts of the economy can recover?
Reply: Anticipating the future is a bit like playing chess and trying To predict your of the opponent next moves. Add to that some power swaps for the purpose of hopefully avoiding miscalculation, and you have a pretty good analogy to how today’s financial environments exist.
Monopoly, the game of life, and 3D Tic-Tac-Toe were some of my favorite childhood games that all required strategic thinking and planning. Forecasting financial, social and political market expectations is more like a four-dimensional chess game today. Our grandchildren were right in town, and luckily, they still like to play board games with Papa and Yaya. In addition to those already mentioned, Battleship is a family favorite Game. The last thing everyone wants to hear in reference to their wallet and financial plan is “You sunk my battleship!” With that in mind, let’s take a look at all sectors of the industry, as they may relate to the current environment.
As expected, different parts of the economy will recover at varying rates and magnitudes. In some ways, recovery stalled with industries such as hotels, airlines, restaurants and most hotels / leisure companies still plagued by so muchsocial distancing protocols, ppsychological barriers and the definitive closings of businesses already announced. Larger-cap companies, especially in technology, software, communications services, consumer discretionary and healthcare, have generally resisted the pandemic better than other areas. Chess players take the time to analyze the chess board, making sure that the next move is the most beneficial, although it is not always the most obvious choice.
Of the eleven sectors, in the short term, political uncertainty can influence tendencies. Healthcare is an example of an area under the microscope as we sort Supreme’s replacement Justice of the Court Ruth Bader Ginsberg and facing headwinds during the presidential election process. The technology might be challenged in the short term, but as we move forward this area is likely to benefit from permanent changes in the way we interact due to COVID-19. Communication services and consumer discretionary are sectors that can fall into this same category.
As the economy recovers, the sectors to watch are materials, financial, industrial and consumer goods. As we are waiting to see if there will be another up-tick 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 increasing as the world replenishes based on global manufacturing data. Typically, as manufacturing picks up, cyclical sectors strengthen. One example is our recent search for bikes for the family. The the economic theory of supply and demand influencing prices and consumption is true in this category.
More uncertainty could remain for commercial real estate, in particular in the retail and office categories. What this may look like in the future is uncertain, however., I remember a time before the internet and the cloud for data storage, when the demand for commercial space was greater due to To the need for legal libraries and huge amounts of file space for documentation. Disruption 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 advantaged sectors may be appropriate. As always, consult with your team of trusted financial advisors to formulate a strategy tailored to your personal preferences, needs and goals. Observing trends in the three areas of major economic indicators, employment reports and inflation rates can help us find our way.
Whether it’s returning to work, dining, catching a plane, or attending a crowded sporting event, many seem reluctant to return. To their pre-COVID-19 activities. The psychological impact of the virus is likely to 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 statements, opinions or forecasts provided here will prove to be correct. The opinions expressed are those from the writer to October 14, 2020, but not necessarily those of Raymond James and Associates, and subject to change at any time. , solicitation or recommendation to buy or sell or otherwise invest in any of the securities / sectors / countries that may be mentioned. Investing involves risk and you may incur a profit or a loss regardless of the strategy you choose, including diversification and asset allocation.
“Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER ™, CFP® (with a plate design) and CFP® (with a flame design) in the United States, which it awards to individuals who successfully complete the CFP Board initial and ongoing certification requirements. This article is provided by Darcie Guerin, CFP®, First Vice President, Investments & 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.