By Angela Dorsey
In the aftermath of the coronavirus crisis, news about the condition of the United States economy is revealing more than ever the disconnect between two sides of the same coin. On one hand, there is no doubt that the markets have made a spectacular recovery from around this time last year. (1)
On the other hand, the unemployment rate and the number of Americans without a job continue to remain worryingly above pre-pandemic levels. (2) Some individuals and families have significantly increased their savings this past year due to decreased dining out and lack of travel. But others are struggling to make rent as they scramble to find ways to bring in additional income.
The question remains: How well is the economy really doing, and for whom?
If we judge the economy based solely on market performance, then the U.S. economy is booming. Since this time last year, the DOW has gone up 20%, the NASDAQ has gone up 48%, and the S&P 500 has gone up 27%. These are no small increases. The positive performance of the stock market means that businesses are thriving, retirement accounts are up, and investors are realizing large gains.
Part of the optimism for the future of financial markets is the expectation of a strong economic rebound as the pandemic fades in the second half of 2021. But market performance doesn’t come close to telling the full story. According to the National Bureau of Economic Research, 84% of all stocks are owned by the top 10% of American households, as defined by total wealth. (3) This means that millions of Americans have no real stake in the performance of the markets.
Job Losses & Small Business Trouble
Because the markets can’t tell us the whole story, we must also look to other economic indicators. One of the most revealing indicators of the fallout from the coronavirus pandemic is the unemployment rate. Although the unemployment rate has been steadily decreasing since its record-high in April of 2020, (4) more than 10 million Americans are still without jobs.
Additionally, millions of small businesses are barely hanging on. With an uncertain and slow vaccine rollout, it’s unclear when things will be “back to normal” so that businesses can once again operate at full capacity. Clearly, the disconnect between the financial markets, the unemployment rate, and the tenuous future for small businesses shows two very different sides of the same story.
What Does The Future Hold?
Of course, there are some good things coming out of this horrible pandemic, such as huge advances in biomedical technologies. Some experts believe the mRNA breakthrough behind several vaccines could soon be applied to treating cancer. (5) Not to mention, many Americans have been able to save money and improve their financial security, making them more likely to go out and spend when the world does return to normalcy (or something resembling normalcy).
However, not everyone is as optimistic. Some economists predict a new Roaring Twenties scenario for the stock market, (6) while others are concerned that temporary layoffs could become permanent. Even before the pandemic, labor economists were concerned that artificial intelligence and robotics would result in the elimination of more than 20 million jobs over the next two decades. COVID-19 has accelerated the movement to a digital future.
One thing for sure that most can agree on is that this decade will probably look very different from the last one.
Focus On The Future With A Trusted Partner
Whatever the future holds, all we can do is focus on what we can control and prepare for a variety of scenarios. At Dorsey Wealth Management, we help empower women and couples to plan for a secure future, with the hopes that no matter what is happening in the economy, you’ll be protected. To schedule a free introductory 30-minute phone call, you can reach us at (310) 370-7776 or firstname.lastname@example.org.
About AngelaAngela Dorsey is the founder and fiduciary financial advisor at Dorsey Wealth Management, a fee-only financial planning firm based in Torrance, California, helping successful women and couples prepare for retirement. Angela earned a BS in computer science from Loyola Marymount University, an MBA from UCLA Anderson School of Management, and spent 20 years as a Senior Compensation Specialist in large corporations before becoming a Certified Financial Planner™ (CFP®) and a Registered Investment Advisor (RIA). That background gave her the tools to couple with her passion for empowering women to make the best financial decisions possible. Angela lives in Torrance, California, with her husband and two children. She enjoys spending time at the beach or surrounded by nature. To learn more about Angela, connect with her on LinkedIn.