What does this COVID-19 pandemic mean and how will it affect your financial holdings?
Unless you’ve been living under a rock recently, you’re likely now experiencing the predicted results of a worldwide COVID-19 coronavirus pandemic. If you’ve been a reader of this blog, you know we’ve warned of such an event for years and encouraged people to be prepared.
If you’re not already prepared, it may be too late now to do much besides trying to survive as best you can.
After a string of deaths, some heart-stopping plunges in the stock market and an emergency rate cut by the Federal Reserve, there is reason to be concerned about the ultimate economic impact of the coronavirus. Even a “mild” pandemic will wreck havoc with your investments.
Morgan Stanley advised clients that economic disruption could last into Q3, which is July to September. I believe it will go much longer than that, and the global economy could take years to recover. Individual business recovery will be painfully slow, if they’re even able to keep their business afloat.
Chinese officials shut down all public transportation including buses, subways, trains, and the airport, in response to the Covid-19 coronavirus outbreak. Factories were shut down as people were afraid to get out in public, resulting in global economic issues as products sat in shipping containers on China’s docks, not being shipped.
As the world’s second biggest economy and largest manufacturing hub, China is the source of many consumer and industrial products such as cell phones, TVs, clothing, pharmaceutical drugs, solar panels, auto parts and steel.
- Apple warned that sales in the current quarter could fall short of forecast because of production delays tied to the virus infection. Apple’s manufacturing partner in China, Foxconn, is facing a production delay.
- Some carmakers including Nissan and Hyundai temporarily closed factories outside China because they couldn’t get parts.
- Other U.S. companies such as WalMart have since issued similar warnings.
- Proctor & Gamble warns of 17,600 products using 9,000 materials from 387 factories in China… ALL impacted by the coronavirus pandemic. [Natural News]
- The pharmaceutical industry is also bracing for disruption to global production.
Financial panic will wreck the markets in short order.
Government spending to aid recovery is going through the roof (some have suggested as much at $6 trillion), yet they will be receiving less in tax revenue from businesses that closed and individuals out of work. The results of all this money printing by the FED guarantees higher inflation in the future.
The stock value of the largest businesses could collapse devaluing millions of investor’s portfolios. Investors are dumping their stock holdings in favor of cash and hard assets like physical gold and silver. The spot price of gold and silver has tanked in recent days making it an attractive investment.
Paper gold and silver will have trouble moving up in the short term while many investors are forced to sell their positions to raise cash to cover for losses or deal with being laid off. But, once this crisis is over gold and silver prices could increase substantially.
During a pandemic millions of people will be unable to work due to illness, taking care of sick family members, and self-quarantining themselves. City, county, and even the federal government are declaring health emergencies, forbidding groups from gathering, and telling people to stay home. Some jurisdictions have already instituted mandatory “shelter in place” orders. Schools and businesses are closed, transportation reduced or halted. Ill truck drivers, rail and warehouse workers could bring interstate commerce to a grinding halt. Gas and oil deliveries could take months to return to normal production.
How many air traffic controllers could be out sick before flights were cancelled? International travel has all but been eliminated. Businesses hardest hit would include retail, trade, education, travel and tourism, public entertainment and anywhere large groups of people would gather such as sporting events and concerts. Import and exports markets would be devastated.
Supply lines are disrupted and delivery times are extended, which is bad news for just-in-time inventory. Goldman Sachs is warning of “severe” global supply shortages if manufacturing can’t get back to normal soon. Prominent hedge fund and asset managers have warned about coming supply and demand shocks. Meanwhile, production facilities are operating at 70-80 percent capacity, but many factories are still experiencing labor shortages. Consumer spending would be down further delaying economic recovery.
We’ve already seen many essential items in short supply because of panic buying and due to loss of production capacity. President Trump invoked the Defense Production Act to mandate private industry to increase production of supplies to support national security.
Housing prices will likely plunge as millions of homeowners go into default. With millions out of work and unable to pay their bills including rent and mortgage payments, financial institutions facing mounting defaults would have no choice but to suspend debt owed until the pandemic was over. Other financial institutions would face similar threats of collapse until business returned to normal. But, how long will that take? Thousands of businesses may never be able to recover resulting in the loss of millions of jobs. Large and small businesses alike may loose key employees who would be difficult to replace. Moving forward businesses would face labor shortages due to the number of people who died, making a return to full productivity difficult.
Global instability would be the rule rather than the exception. 3rd world countries devastated by the pandemic could face new internal struggles for power as whole armies could be wiped out by the virus. International trade relations we once had may no longer be there.
This COVID-19 world pandemic has set the dominoes in motion. One event will trigger another; one financial collapse will bring on the next one. The results will be nothing short of catastrophic. In my opinion, those that say we will bounce back and things will return to normal are living in a fantasy. The resulting new normal of this pandemic will make our lives nothing like it was before. September 11 is seen as the day that changed the world, it changed the travel industry, safety screenings, everything. Now add the coronavirus pandemic that will change the world again in the way we interact, move, breathe, everything.
As an investor your first course of action is to stay informed. The COVID-19 coronavirus pandemic may not spiral to catastrophic levels, but health experts have said a pandemic will happen, it was just a matter of time. But then there is always natural disasters and terrorism to worry about. The more you know about the COVID-19 pandemic the better position you will be in to adjust your portfolio accordingly when the time comes if not sooner. The sooner you make that adjustment, the better off you’ll be.
Diverting a portion of your assets into stocking up on essential food and supplies may be a prudent move, since this pandemic may keep you housebound for months at a time. No well-diversified portfolio will help you out when the grocery stores are closed and you are waiting in line for a government hand out.
Stay informed, plan accordingly, and be prepared.