December 2020 – 3 in 3
This month, Jason Weaver discusses “Slowbalization,” Current Yield, and the Potential Long-Term Effects of COVID.
Globalization reached historically high levels in 2008 and retreated into 2017. Then, it picked back up from 2017-2020. The COVID-19 pandemic is driving countries and businesses to review and/or reduce their economic interdependence. Two factors that contribute to this are public health concerns and national security worries. It is likely that going forward, there will be continued gradual slowdown in trade (which can be referred to”Slowbalization”).
Current yield is calculated as follows:
Annual income (interest or dividends) divided by the current price of the security. Current yield has historically been the best predictor of future bond returns. They currently expect rates to be lower for longer. The short term bonds are expected to remain low, but the long term bonds could steepen.
Potential Long-Term Effects of COVID
Certain business model disruptions have been accelerated because now, more than ever, people are working from home. With the pandemic, companies were forced to go virtual faster than they might have planned. This has disrupted business models because some have had to quickly adjust to accommodate their employees during this time. Also, technology continues to advance quickly as more and more people demand and/or rely on specific programs to keep going.
Accelerated Pace of Change & Innovation
Right now, it is easier than ever to connect and communicate virtually. There are so many platforms to stay connected (i.e. Zoom, text messaging, emails, conference call lines, virtual webinars, etc.) With that, more and more content is being produced and consumed. With so much information available at people’s fingertips, there are constantly new ideas and processes being generated.
Flexible Fed (Higher inflation)
Governments will tolerate higher fiscal deficits (Aggressive Spending)
Some believe that the U.S. and China won’t completely retreat their relationships, but “Slowbalization” can contribute to how quickly the relationship continues to grow.
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Deceber 2020 – 3 in 3 Weaver Consulting Group is a local, family owned, Registered Investment Advisory practice in Huntington Beach, California. We have been providing our expertise and sharing our experiences for the last 22 years. It is our priority to act in the best interest of each person that we work with. Therefore, the experience you have with our firm is individually tailored. We strive to include all aspects of your personal and financial goals when consulting.