I’ve spent my entire career in global financial markets at the world’s largest asset management firms, in academia and, now, at Seattle’s oldest wealth management firm. Here’s what I want to tell you: I haven’t seen economic turmoil like this in my lifetime. There’s a long journey ahead, but we will rebound.
I’m also a native Seattleite who left New York to move my family back to the city and community where I wanted to raise my kids. I’m Italian-American and have family in the European country hit hardest by this pandemic. For me, this is personal.
Coronavirus has turned our town upside down. We’re worried about our health and that of our friends and families. Businesses are closing. People are losing their jobs. Many are worried about their financial future. For those at, near or in their retirement years, this fear is particularly acute.
The Seattle we see today is a young, dynamic city that attracts people from around the globe. What we often forget is that it grew up on the backs of industries and individuals more traditional than technological. As hard as it might be to hear, younger workers will bounce back. Those who’ve helped build this community for years aren’t so sure.
Many are looking to 2008 for clues for what to do, but last decade’s recession was a result of weaknesses in the banking system, not a reaction to a global pandemic. Yes, we’re in uncharted waters. The financial crisis of 2008 did, however, provide a compass to help navigate the way back to shore.
The significant measures the federal government is putting in place, informed by 2008, will help. Congress is working through an unprecedented $2 trillion fiscal stimulus package which, despite its flaws, will likely include loan guarantees for large and small businesses, unemployment and job guarantees for workers, and relief from rent and foreclosures. The Federal Reserve has committed to countering financial impacts by any means necessary. New liquidity in corporate debt markets is designed to, ultimately, help companies grow again.
Meanwhile, we need to accept that financial markets will remain volatile. S&P 500 earnings, U.S. GDP and employment are expected to drop dramatically this year, and many earnings estimates have not yet been updated for the current environment. Investors seeking to time the market may end up taking on more water, as any rebound could be just as rapid as the selloff and come in a series waves large and small.
While I’m generally wary of deficit spending, now is the time for the government to step in to aid the economy. But the eventual rebound depends on the duration of the outbreak ― not just steering by the government ― and a return to normal consumer activity.
With one third of the United States under some form of “stay at home” orders, this remains a challenge. But there are glimmers of hope on the horizon.
Unlike 2008, the industries hit hardest so far ― hospitality, travel, retail and entertainment ― have a strong capacity to bounce back quickly. Technology, which has helped keep markets strong in recent years, is likely to feel comparatively fewer operational impacts, and the tech-heavy NASDAQ has been performing better than the S&P since the downturn. We’re seeing, if not yet in the United States, falling rates of infection and people getting back to work in China and South Korea, two countries that fell victim to the pandemic early and are beginning to turn the corner. While recurrence remains possible, this does give us hope.
And, here at home, families are rallying together to keep their neighbors fed and the lights on. Small businesses are banding together to help keep each other afloat. Our philanthropic community of individuals, foundations and corporations are all-hands-on-deck to support the services and populations most at need right now. These actions are both a testament to the spirit of our city and an indicator that we can all get through this together.
Fear and uncertainty can lead to bad decisions. It’s easy to get discouraged by the stock tickers that sit in the corner of every screen and real time counts of positive tests and, tragically, deaths at home and around the world.
There is a path forward. Retirement plans are experiencing a shock, but in the long run, they may end up stronger than before.
And we in Seattle will be stronger, too. It’s likely to take longer than we expect, and definitely longer than we want. But now’s not the time to jump ship. Eventually, we’ll see sunrise on the horizon.
Gino Perrina is chief investment officer at Seattle-based Laird Norton Wealth Management. He can be reached at email@example.com or (206) 464-5100.