Trying to get a handle on our post-coronavirus future? Follow the money.
RealAssets Advisor magazine offers “diversification strategies for private wealth advisors” of interest to financial planners and wealth managers. The April 2020 issue offered insight into potential trends that may have a bearing on wealth rebuilding opportunities as we move forward from the COVID-19 induced slump in market values and economic vitality.
Take “fracking,” a process that involves high pressure injection of water, sand and chemicals into fossil fuel deposits, fracturing rocks to release trapped oil and natural gas. Fracking has resulted in increased production from new and old wells and fields, creating new jobs and sources of tax revenue for energy producing states. It’s made America energy independent, no longer dependent on OPEC or potential adversaries like Russia. What would happen if fracking was banned?
On Jan. 31, Sen. Bernie Sanders and Rep. Ocasio-Cortez and two other lawmakers introduced the Ban Fracking Act that would do just that. Joe Biden in a back and forth with Sanders at the Democratic debate on March 15 said he, too, would ban fracking. Recognizing that fracking is widely used in key blue-collar voter states like Pennsylvania, Ohio and Colorado, a Biden spokesperson backtracked, saying Joe would only ban new drilling permits on federal land and offshore. Politics and other issues aside, RealAssets notes that a total fracking ban would “cost up to 7.5 million American jobs in 2022 alone (and) lead to a cumulative GDP loss of $7.1 trillion by 2030.”
Mentioning politics in any way is the “third rail” of editorial opinion writing as readers pile on pro and con. Risking scorn, the point is, as COVID-19 news begins to abate, politics will rise again as a press focus. In fact, with Joe Biden the presumptive nominee, Campaign 2020 is coming back with vigor. Your financial planning objective is to consider how political outcomes are likely to impact your investments, investment opportunities, estate planning strategies, financial independence now and in retirement, and tax strategies. Tuesday, November 3, 2020, will likely influence your financial future in some way, pro or con.
Certainly, environmental concerns are important, also driven by political outcomes. Per RealAssets, “Wind energy is now the top source of renewable energy in the country, surpassing hydroelectric generation in 2019.” Almost 60,000 wind turbines are spinning across 41 states and the industry plans to sink $62 billion into new projects over the next few years. “Green initiatives” are likely to find favor with Congress and with tax-writers. Sectors that are profitable will attract investment capital in various forms.
With online shopping as a trend accelerating during our “viral lockdown,” the impact on bricks and mortar shopping is up for scrutiny. The magazine quoted Bisnow and Cushman & Wakefield as noting that 9,300 U.S. stores closed in 2019, and 2020 could be worse with as many as 12,000 closures. That estimate was made before we really began to focus on the full fallout from the shutdown. The repurposing of existing real estate could become big business, especially for large and lagging shopping malls. Large real estate investors and venture capital funds are sitting on a mountain of money looking to go somewhere. Many retirees depend on dividends from real estate investments for income. When it comes to bargains and opportunity, is it 2008 all over again?
“Work from home” mandates forced people to get more tech-savvy, beef up home office equipment, learn new communications techniques such as Zoom and other services that permit virtual meetings. Could companies decrease expensive business travel in favor of virtual gatherings, impacting airlines, hotels, car rental services? Nevertheless, bargain hunter Warren Buffet through Berkshire Hathaway bought 970,000 shares of Delta Air Lines in February, now controlling over 11 percent of the global air giant.
Per RealAssets, big tech markets like Austin, San Francisco, Silicon Valley, New York City and Seattle are beset with “eroding affordability and relatively lackluster quality of life.” Zillow suggests that locales like Kansas City, Oklahoma City, Cincinnati, Jacksonville and San Antonio are likely to see more growth as tech centers. Also, there’s a growing need for close-in warehouse facilities in major urban areas. A study by Deloitte found that 64 percent of consumers were not willing to pay extra for two-day shipping, spurring interest in getting goods to consumers quickly without extra cost burdens. Attention farsighted contrarians!
Every economic downturn causes pain in various forms. But hardship spurs innovation, creativity. Money moves from one pocket to another. Potential opportunities in infrastructure, education and data centers are being scrutinized. Stocks in general are better bargains than they were in mid-February. The next bull market is out there. We don’t know exactly when it will ensue, but now is the time to consider your strategy and your economic future!
Lewis Walker, CFP®, is a financial life planning strategist at Capital Insight Group; 770-441-3553;firstname.lastname@example.org. Securities & advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis is a registered representative and investment adviser representative of SFA, otherwise unaffiliated with Capital Insight Group. He’s a Gallup Certified Clifton Strengths Coach and Certified Exit Planning Advisor.