It’s hard to believe we are more than halfway through 2021 given how large its predecessor looms. 2020 is etched deeply into our communal consciousness and its effects will linger for a long time. A common thread in most conversations with clients or presentations from economists is heightened uncertainty. Whether it is about COVID, world politics, U.S. politics, the economy, or a number other topics there exists a feeling of being un-moored. Let’s look into each of those areas and see if we can find some solid ground.
Let’s start with COVID, the latest discussion seems to be focused on the Delta Variant. The variant appears to be more virulent and is moving quickly through the un-vaccinated population. However, while the vaccines don’t offer total protection, they do seem to be keeping the vaccinated out of the hospital which is a significant benefit. As of right now we don’t expect to see a large economic impact from the variant, but that may change.
The economy, overall continues strongly into reopening, although we continue to see dislocation in the labor market and building materials. Despite political rhetoric, the labor situation is not simply just enhanced unemployment benefits. It is a combination of enhanced benefits along with a population that is moving to different locals (often smaller ones) and recalibrating worker expectations in a post-pandemic economy. A recent survey* noted that almost 40% of respondents said they would consider quitting if their employers were not flexible about working from home. Employment changes brought on by COVID are here to stay. On the other hand, the recent spike in building materials is likely temporary. Most of the sudden jump in product prices like lumber seem to be related to COVID restrictions rather than a longer-term effect such as raw material shortages. We will likely see the costs associated with materials come down and settle at a lower point, but still elevated above pre-pandemic levels.
From a U.S. political point of view, we will probably see an infrastructure bill of some type pass in the coming months. Beyond that it is hard to say what we will see out of Washington D.C. as political gridlock continues to reign supreme. We will be keeping an eye out for changes to the tax code so we may appropriately advise our clients.
On a global scale, there has been a lot of focus on the growing “Cold War” between the United States and China. Taiwan is a focal point and will continue to draw attention and concern. While there does not seem to be any imminent action likely, any increased tension in the region would be cause for concern. Beyond that we continue to see a large wave of cyber incursions that businesses and governments around the world are working at a fever pitch to try to get under control. This is likely a problem that will get worse before it gets better.
Finally, one question we field a lot is regarding inflation. We are currently experiencing a spike in inflation. While acknowledging the current state of affairs, we are a far cry from returning to the 1970’s in America; a period of high inflation. Significant deflationary pressures continue such as technology, an aging population, and globalization. Although the benefits of globalization are starting to wane when looked at through a post-pandemic lens.
For investors, flexibility in the face of uncertainty is the order of the day. While uncertainty typically is characterized by a sense of foreboding, it also contains the elements of renewal and progress. With renewal and progress come new opportunities and those are where investors may be able to benefit.
As always, if you have concerns about your financial picture, please reach out to us. We would love to schedule an appointment either by phone, video conferencing, or in person. c
Kevin P. Sullivan, CFA, CFP®, AIF
1229 Lake Plaza Drive
Colorado Springs, CO 80906
719.576.4500
*Melin, A., & Egkolfopoulou, M. (2021, June 1). Employees Are Quitting Instead of Giving Up Working From Home. Bloomberg.com. https://www.bloomberg.com/news/articles/2021-06-01/return-to-office-employees-are-quitting-instead-of-giving-up-work-from-home.
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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee
that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Kevin P. Sullivan and not necessarily those of Raymond James. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.
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