Jim Niedelman:
We’re talking 4 Your Money now with James Nelson, Financial Advisor with NelsonCorp Wealth Management. Great to see you, James.
James Nelson:
Good to see you too, Jim.
Jim Niedelman:
We’re now several months into the virus-induced crisis and seeing more economic data coming from that. It doesn’t look good for a lot of people, and there’s been certainly speculation as what a recovery could look like. Can you tell us a little more about that?
James Nelson:
Yeah. The economic data has been brutal. The data that we’ve seen in the last month, our first graphic helps describe maybe a potential recovery path. The first one there is a V-shape, so that illustrates a sharp decline. And then, a quick rally. The key here is that’s a pretty short timeframe. Things bounce back to where they were. That would be ideal, and we’re all hoping for that.
James Nelson:
The next one on the top is more of a U shape. That’s a sharp decline, just like in the first scenario, but a more prolonged recovery, takes maybe six months, 12 months, maybe even more than a year before things really bounce back. Then, we go to the bottom, the W shape. That’s another potential chance here that we have the sharp decline. We recover a bit, and then we retest the lows. And again, that’s similar to the V-shaped, except this is a prolonged period of time again, and we retest the lows. And then, the last one is the square root symbol there where we have the big decline, and then we move sideways for a period of time, and the recovery takes years, not just a short timeframe of bouncing back.
Jim Niedelman:
Can certainly tell by that graphic that some paths are better than others. And I understand even economists vary on their opinions on these things. Is it too early to tell what might be most likely from that?
James Nelson:
Yeah, it’s early, but we can make some assumptions. I think the biggest variable here is just the health aspect. Are we going to develop a vaccine, a timeline on that? When can people feel comfortable getting back to work? That’s going to be the big issue, and time will tell how that plays out. If we were betting, we would say that the square root symbol, as depressing as that is, is probably a more likely outcome. It’s going to take quite some time for people to get back to work and feel comfortable getting back to work. And again, a lot of these businesses, manufacturing in particular, need people back in the facilities. They can’t work remotely like some companies are able to do.
Jim Niedelman:
And certainly temper expectations. What do those different recovery scenarios mean for retirement accounts and other investments?
James Nelson:
Yeah. I think the biggest thing is just knowing what you own. The large household tech companies are almost set up for an environment like this. A lot of their employees work remotely as it is and can weather a storm like this. Then, you take a look at the energy sector, manufacturing, small caps as whole, a lot of industry and manufacturing. Those folks need to be at work to produce something, so we’re seeing a huge disparity between the companies that are almost set up for remote work versus the companies that need people day in and day out manufacturing something. So, knowing what you own is going to be key, and hopefully, this recovery’s quicker than we’re thinking.
Jim Niedelman:
James Nelson, NelsonCorp Wealth Management. Good information. Good to see you, James.
James Nelson:
Yep. Thanks so much, Jim.
Jim Niedelman:
And if you missed any of our discussion, we have that available for you on ourquadcities.com.