How I see the near-term financial picture – Robert J. Kerr
I thought I would send you a note about how I see the near-term financial picture.
The economy will take a long time to repair. While the stock market may have spurts of recovery, it will still drop lower over the next 12 months. That should not cause you to sell off and retreat. Rather you should assemble enough cash and short-term deposits to meet your needs over the next year. The balance of your savings (most) should continue to be invested with strong companies with smart management, sound financial structures and products that will continue to be in demand.
Remember that you have many years to go and your investments will grow with you over the years. It is just too hard to pick times to return to the markets after you have sold out. Selling is easy and comforting. But timing when to come back is not easy at all.
Let’s see how the pandemic evolves… How our businesses handle a recovery… How our own finances meet our needs as we go forward. Remember, we are not gamblers, we are not speculators. Yes, a handful of investments will exceed our average returns. But what we want to do is survive this downtime, which may go on longer than you think. So, work with good investment managers with the bulk of your money. Keep cautiously optimistic. Do not try to hit home runs, unless you have excess funds beyond your lifetime needs.
Do not try to hit home runs, unless you have excess funds beyond your lifetime needs.
See the worldwide economy in today’s perspective. Consumers in the developed world have had a terrible scare and will be very careful with their spending for the next several years. Togetherness will be restricted. Travel will be curtailed. Debts will need to be repaid. Businesses rebuilt. Re-employment will be cautious. Bankruptcies will be plentiful. Corporate profits will be small or negative. This economic shock is going to reverberate for years.
See the worldwide economy in today’s perspective.
There are a lot of vulnerable people. Most Canadians were not prepared financially for retirement. They have not saved enough to finance the rest of their lives. They have debt with not a lot of ways to repay it. They will have to reduce their visions of the future and attend to getting their affairs in order. They may have to keep working longer than they planned. They will have to spend less than they planned. But they will find their way through. Necessity is the mother of invention. They will take small steps towards improving on all fronts. They will survive.
You will find your way through. Necessity is the mother of invention.
Right now, the sun is shining, buds are on the trees, the grass is growing, and people are walking up and down the streets. A young girl on her first bicycle wobbles up the street with mother close at hand. She hands the bike to mom, dashes into the trees and returns with some wildflowers for mom. So many new children. So many dads around to spend time with them. So nice to see neighbors and strangers talking on the streets. We will return to normal soon, but it will be a new normal. A nervous new normal. It will take a long time for colleges graduates to find new careers and for retirees to find their comfort in the revised financial circumstances. I feel most for the young folks just starting their lives with hopes and dreams, but limited ways to go. It will take some time for them to find their ways.
We will return to normal soon, but it will be a new normal.
We will find economic growth again. It will just take a while. In the meantime, we will need to help our neighbors, our families, our friends and our employees. We will need to show kindness and generosity. All of us have lost ground and financial strength but we will survive and prosper. That’s what the human condition is about.
We will find economic growth again. It will just take a while.
We will emerge stronger because challenges make us stronger, smarter, wiser. New leaders will arise, new laws will be established, new institutions and businesses will improve. New children will be born, marriages will reappear, gatherings with friends will be more important than ever.
Your finances will return to be in good condition. This will happen gradually. We will be more careful about how we spend. Governments will be taxing us more at all levels to beat down the public debt that has exploded. We will adopt more conservative policies, will focus on rebuilding our finances, both public and private. I cannot wait to see it all happen.
We will emerge stronger because challenges make us stronger, smarter, wiser.