In today’s Steady Investor, we look at key questions investors are asking, and factors that we believe are currently impacting the market such as:
The U.S. Budget Deficit Swells – The pandemic created a perfect storm for deficits: falling tax revenues coupled with soaring government spending. Through the end of June, federal revenue has plummeted 28%, to a mere $241 billion. The extension of tax deadlines to July 15 are a driver, but sinking corporate revenues in the first half of the year also play a big role. For the single month of June, the U.S. budget deficit totaled $864 billion, bringing the 9-month fiscal year total to $2.7 trillion. Tax receipts in the fiscal year have fallen 13% as government spending has increased by 49%, which puts the U.S. government on pace to record its largest annual deficit since World War II.1 The numbers recorded so far do not account for future stimulus, which increasingly seems likely as coronavirus continues to spread and impede a swift rebound in the services economy. So far, the U.S.’s massive deficits and increased government borrowing have not come at a significant cost, at least in terms of interest owed on debt outstanding. The cost of borrowing, as represented by net interest costs, have fallen -11% in the fiscal year so far.
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See How You Can Navigate This Recession
It remains to be seen just how quickly the U.S. economy can recover from the current recession. In our view, this uncertainty can leave many investors, especially those nearing or in retirement, fearful of what’s to come. If you’re at or near retirement, this recession may require pivoting your retirement investing strategy.
The market turbulence and uncertainty are scary—but now is the time to take action and prepare yourself for the coming months. It’s important to understand how recessions work, how long they last, and how to potentially protect yourself and your family from long-term damage to your assets and security. We can help you with our free guide, The Economy is in Recession: 5 Insights to Navigate Your Way Through It.2
If you have $500,000 or more to invest, get our free guide today. You’ll learn the most scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather this one. Don’t wait—get this guide today!
Download Your Copy Today: The Economy is in Recession: 5 Insights to Navigate Your Way Through It
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Airlines Continue to Feel the Pressure – When Congress passed its $2.2 trillion stimulus package in March, airlines were allocated $25 billion to cover most payroll costs. In exchange for the stimulus, airlines agreed not to furlough any workers until the funding dried up, effective October 1. Many airline executives believed that October 1 was far enough away that demand would return to the market, but in the absence of a vaccine, those projections are shifting as Americans remain reluctant to travel. Delta Airlines lost $5.7 billion last quarter and told 25,000 workers they may be furloughed when federal aid expires. United Airlines indicated last week that they plan to send 36,000 similar notices to employees, while American Airlines already sent 25,000. American Airlines saw passenger revenue plummet by 80% in June 2020 as compared to June 2019, and many airlines now believe that they are significantly overstaffed based on what the future of travel looks like in 2020.3
China Becomes First Major Economy to Return to Growth – China reported growth in the second quarter of 3.2% from a year earlier, as the country has largely gained control of the coronavirus outbreak and as stimulus measures took hold. China’s growth was higher than most economists expected, and represented an 11.5% rebound from Q1.4 Whether China can sustain this growth in the coming quarter will largely rely on domestic activity, as the global economy slowly inches back to growth territory.
Pandemic-Induced Retirements – A recent study conducted by three prominent American universities found that the pandemic-induced recession has generated a wave of early retirements. In some cases, larger corporations have offered older employees early retirement packages as a means to shrink the workforce and cut costs, and in other cases older workers are simply deciding to ‘stay at home’ permanently. According to the study, the share of people who dropped out of the labor force because of retirement jumped to 60% from just over 50% before the pandemic.5 With early retirements often comes the need to flip an investment portfolio from growth-oriented into growth and income-oriented, which many retirees may find challenging in the low interest rate environment.
In addition to low interest rates, soon to be retirees are also concerned about how to invest during a recession. If you’re at or near retirement, this recession may require pivoting your retirement investing strategy. In order to do this, it’s important to understand how recessions work, how long they last, and how to potentially protect yourself and your family from long-term damage to your assets and security. We can help you with our free guide, The Economy is in Recession: 5 Insights to Navigate Your Way Through It.6
If you have $500,000 or more to invest, get our free guide today. You’ll learn the most scope and impact of recessions, and get our viewpoint on the most important moves you can make to weather this one. Don’t wait—get this guide today!
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