EDITOR NOTE: Ric Edelman, one of the most influential financial advisors in the industry, just published a report on the economic fallout of COVID-19. Originally written for clients, the report identifies the most fragile areas in which investors may find themselves most vulnerable. If anything, the report tells us that we’re not quite out of the woods yet, and that millions of investors can still collectively lose trillions of dollars in the market. Indirectly, this kind of info is also useful to gold investors looking to hedge inflationary risks or take advantage of market opportunities.
The report was written for the firm’s retail clients and is now available to the public. In it, Edelman explains the firm’s long-standing, four-pillared investment philosophy – based on diversification, a long-term view, strategic rebalancing, and the use of low-cost, tax-efficient investments – and why a disciplined investment approach is more important than ever.
"Americans without a sound investment strategy often fall victim to behavioral finance biases that cause them to make bad decisions," said Edelman, who is considered one of the most influential thought leaders in the financial planning and investment management profession. He is in the Barron’s Financial Advisor Hall of Fame, hosts a popular radio show that airs on more than 100 stations across the country, and is a #1 bestselling author of 10 books on personal finance.
The report offers a 10-question Investment Readiness Quiz that can help investors determine if they’re in danger of panicking the next time stocks prices fall. "Millions of investors sold at the bottom of the 2007-2009 Credit Crisis," Edelman said, "leading to massive losses from which many never recovered."
The report delves into the virus’s impact on the economy, employment, real estate, agribusiness, state and local government budgets, philanthropy, higher education, pensions/annuities/Social Security/life insurance, retirement, and of course, the stock market. For example:
- The Economy and Employment: The Covid-19 pandemic has created one of the worst financial crises in the last 100 years, with unemployment levels not seen since the Great Depression. Edelman argues that the economy is unlikely to fully recover until a vaccine is widely distributed.
- Real Estate and Housing: The paper shows that Americans’ struggles to pay their rent and mortgages, along with the shift to remote work, will adversely impact commercial real estate for years, with negative implications for urban markets.
- Retirement Planning: The Covid-19 pandemic has exacerbated the already serious retirement savings gap. With so many families entering retirement with little money saved, reliance on Social Security is at an all-time high – just as the Social Security Trust Fund is being depleted.
- Investing and the Stock Market: The S&P 500 is trading at 22x projected earnings, suggesting that investors are behaving euphorically, in contrast with current economic conditions. In the report, Edelman explains why investors should dampen their enthusiasm.
"Covid-19’s impact on the economy has been and will continue to be unprecedented. It is therefore essential that you consider the many ways it may alter your life and be willing to adjust your investment and personal finance strategies accordingly," said Mr. Edelman. "Americans are an optimistic bunch, but optimism is no substitute for honest evaluation, and hope is not a financial plan."
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