Shea M. from Dallas, TX asks: Hello Mitch, I hope you had a nice Thanksgiving. One of the conversations around our dinner table was about the vaccine, and how an effective vaccine could jump-start the economy next year in a big way. Do you agree, and if so, are there areas of the market that could benefit?
Mitch’s Response:
Thanks for writing, Shea, and thank you for the holiday wishes. I hope you had an enjoyable and safe Thanksgiving as well.
It’s funny you mention vaccines as a dinner table conversation over the holiday – it was a topic at my family’s house, and I’m sure it was also discussed at many, many others across the country! I think most people are hopeful – and ready – to turn the page on this pandemic.
As for the economy, I do think there is a good case for seeing a surge in activity if the vaccine checks all of the key boxes: effective, safe, widely and easily available (at little or no cost), and broadly distributed (people actually get the shot). I think we’re getting to a place where ‘effective’ and ‘safe’ are closer to assured. It’s the last two points that are still a bit uncertain.
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The last point – whether or not people will get the vaccine – is very much up in the air. There is really no way to know how broadly the uptake of the vaccine will be at first, but my personal hope is that the numbers are better than expected. As it is often the case in markets and the economy, “better-than-expected” can lead to very positive outcomes.
Making a million doses of the vaccine is one thing https://go.steadyinvestor.com/download-retirement-strategy-guide?source=zim&medium=blog&term=mitchsmailbox_zim_2020_12_3&content=retirement_strategy_guide . But 300 million or a billion doses is quite another thing and will present some near-term challenges. There have been reports that vaccines may require refrigeration or specific temperatures for storage, and the logistical challenges of shipping the vaccine around the country are palpable. Fortunately, the United States has the resources, infrastructure, and manpower available to rise to the challenge. There will almost certainly be speedbumps initially, but I think the U.S. can overcome them with a little time.2
If we can check all of the vaccine boxes listed out above, I think we could see a strong pop in economic activity in the second and third quarter. From the investment standpoint, however, I think the stock market has largely priced-in a positive outcome – the breadth and depth of recent rallies suggests a firm economic recovery six or twelve months from now. This is not to say you missed the upside – I still believe we are in the early stages of a new bull market, which could mean several years ahead of growth and stock market appreciation. I think now is a time to maintain broad equity diversification, and to look for opportunities abroad as well.
There is another side to this coin, however, that I think is worth mentioning. A delayed vaccine and/or a disorganized roll-out could pose a near-term risk to equity markets, in the form of short-term downside volatility. Also, if the timeline for the vaccine changes, or if initial reports overestimated the efficacy and accessibility of the drug, the market is not likely to respond positively. But these ‘what-ifs’ relate more to short-term possibilities, not the longer-term outlook. And the long-term is what you want to focus on.
There is no way to predict these future outcomes. Instead, I recommend planning a retirement strategy that takes these “what ifs” into account. Our free guide can help you to prepare for what’s to come as you look to 2021!
If you have $500,000 or more to invest, get our free guide, How Solid Is Your Retirement Strategy.3 You’ll get valuable and practical ideas to help build a “weatherproof” retirement strategy that can potentially protect your retirement nest egg from any storm that could threaten your financial security.
Disclosure