After several months of sheltering in place, you may have begun to venture out in these early stages of the “re-opening”. Knowing the virus is still out there, you covered your face with a mask, put on the gloves and kept a small dispenser of sanitizer at the ready. You are not alone.
The U.S. economy is also wearing a mask, provided by the Federal Reserve and Congress. Woven together with trillions of U.S. dollars, our collective economic mask is designed to keep our economy from getting the virus. Small and mid-sized businesses that would have succumbed to Covid-19-induced insolvency are now being protected. Unemployed and furloughed workers, now totaling 35 million with increases expected, are eligible for enhanced benefits that are truly lifesaving. Even stocks, bonds and exchange traded funds are wearing a mask to ensure the virus does not infect the proper functioning of U.S. capital markets!
Today the capital market’s are cheering the Fed’s preventative measures and the “stockpile” of masks they are ready and willing to use. We are pleased with the Fed’s and Washington’s current actions to protect its citizens and economy with these financial masks. But remember, every mask has strings attached and the financial masks of the variety from the Federal Reserve and Washington are no different. As one risk is prevented, others may take its place. As the recovery and re-opening occurs, future inflation, delayed re-hiring and the introduction of new tax legislation are new risks to investing that will need to be considered. Our concern for the economy is what will happen when the masks come off. Will the virus re-emerge and continue to eat away at GDP or will we have survived the assault and have emerged to re-build mask-free? Staying diversified with sufficient liquidity and reinvestment capital will be the mask that we believe will be the vaccine for your portfolio. There are financial, tax, and investment opportunities that should be considered which will allow your portfolio to be stronger when the masks come off.
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