Finance

   

BROWN ON GREEN, A REGULAR COLUMN ABOUT FINANCES

V…U…W?

“Economists debate about when the economy will recover from the COVID-19 crisis. Will the recovery be V-shaped, U-shaped, or perhaps W-shaped? Some expect a quick (V-shaped) recovery because the economy was fine before the pandemic began. Others say it will be slower (U-shaped because lost jobs will return slowly). Still others think the economy will have starts and stops (W-shaped) with some recovery before another fall, followed by a second recovery. Only the Lord knows, but we will recover from the economic impact of this crisis.

In the middle of an economic downturn, it is difficult to see an end in sight. However, when you take the long view you can see, historically, we have recovered from every downturn. Unemployment will reach the highest level in U.S. history before it turns around. We must remember this downturn was self- imposed as we closed our economy to slow the spread of the pandemic. This is something never done before in United States history. We are in uncharted waters.

How many will not have jobs to return to because the business they worked for no longer exists? Will new industries emerge from this crisis? Will they be able to employ those who have lost jobs? Will new jobs be created fast enough to offset the job losses? Around 70% of the U.S. economy is consumer-driven, and if a large number do not have jobs, they cannot consume goods.

How about the stock market recovery? The good news is the amount of money injected into our economy both by the Federal Reserve and congress is unprecedented. While we remember the Fed acted to save banks in the 2008-09 financial crisis, you may not be aware most of that stimulus was limited to the banking system itself. This time, money is flowing to individuals and small businesses to help stabilize them. The idea is to give individuals and businesses enough money to survive and recover.

Interest rates are basically at zero, and the likelihood is they will stay this low for some time. This could be good news for the stock market much like it was in 2008-09. If you want to make a return on your investment, you have no choice but to invest in stocks. Let’s do our best to get the economy moving when it is safe to do so and we can look back later to see if it was a V, a U, a W or even another letter of the alphabet. 

About the Columnist: David Brown is director of Free Will Baptist Foundation. To learn more about the grants program, visit www.fwbgifts.org.”

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