Article by: Tim Marting
The investing world has been globally impacted by the pandemic, while recovery will be slow for many; this recovery will undoubtedly leave the United States in a weakened economic position giving smaller countries with improving economies a chance to increase their global position. Let's take a glimpse of the economic changes caused by the pandemic.
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The Weakened US Economy
The US dollar is at its weakest, many blaming government-offered stimulus packages, and the bailout of large companies such as AIG, Fannie Mae, and Freddy Mac, they are trillions of dollars in debt with few resources to pay this debt off.
European countries are catching up! The mounting debt accumulated by the government paired with a less than the ideal economy has left the United States in a precarious position.
The increase in technology and global availability of the internet has increased e-commerce all over the globe. Technology has opened the door to investing, whether it's stocks, bonds, or real estate. Anyone can invest anywhere in the world, and many are taking advantage of the opportunity. China and India have been using this to their advantage and are quickly catching up.
Millennials Change Investing
Millennials have been spoon-fed technology. They are using it to change everything from banking to investing. E-trade platforms promising no fees and big profits attract millennials worldwide. They are looking to invest and double their money. They have little interest in traditional investing; they want to be hands-on and are not afraid of risk. While they are investing younger, one hopes they are aware of the tax penalties and are knowledgeable in investing before taking this on.
The internet has brought new interest to younger investors, who are bombarded with online ads and promotions for investment opportunities. While most are living paycheck-to-paycheck due in part to low wages (and colossal school loan debt) they’re still looking to investing for a wealthier future. A BlackRock survey showed that 45% of millennials are more interested in investing in the stock market now than they were five years ago. Their contributions to investing will be interesting to watch in the next few years.
All around the world, traditional banking is being challenged by digital wallets and online banking. Banking business done in person can now be done online. While there are some old-time stragglers to online banking; the majority and younger bankers have embraced this.
All this online purchasing, streaming, and banking is directly affecting the market. It allows a user who has never had access to the outside world to bring it in their homes, bringing with it access to shopping and banking, the likes of which they have never had before.
Worldwide Economy Struggles
The pandemic's effect on worldwide economies has left richer countries financially compromised and less fortunate countries near financial devastation. Many small governments are struggling to keep their economies intact as they recover from the pandemic. While larger countries carrying more significant debt, struggle with the same recovery.
The exportation of goods into the US has caused a shortfall of everyday goods. The slowdown and halt in productivity of much-needed goods have multiple companies considering moving back to the United States. This alone will boost the economic environment in the US. The Chinese car chip shortage is proof that the United States needs to increase its manufacturing base in its own country.
The decrease in productivity has governments rescuing failing large businesses who are passing on these costs to consumers. The shortfall of goods and the rising prices on what is out there have caused consumers wealthy and poor to hold on to their money much longer, choosing not to invest at this time.
Financial experts fear inflation is near, based on the government spending and US's increasing debt, global decline in productivity, a decreased workforce, and reduced competition from lack of international trade. Some fear there will be a financial collapse.
Loss of the Workforce
In the US, the workforce is shrinking, Baby Boomers have retired, by choice and some swayed by the pandemic. Most had little saved before the pandemic, and what they did have was spent during the pandemic. Social security won't cover their cost of living; the result (as their numbers are great) is yet to be fully understood.
Government stimulus checks and unemployment have become an income in this pandemic, and none receiving these benefits is in a hurry to go back to work. The surplus of jobs and lack of everyday workers have created slow down to a near halt, especially for small business owners.
There are more jobs now than there a year ago. The decline in applicants has businesses offering an increased wage that will have long-term effects on already suffering small and mid-size companies. The impact of this increased wage will no doubt impact the economy.
Hopes of Recovery
Yet, there have been signs in the US. and abroad of an economic comeback. The housing market worldwide has seen an increase, fueled by low mortgage rates. After spending months trapped in their own homes, people crave larger living spaces; those who aren't adding on a room are looking to buy a home. People are looking for security, and owning your home gives them that. The shortage of housing materials and the recent rising cost of these materials may hurt the housing market. While the US interest rate remains low, Europe's interest rate is at an all-time low.
Experts are expecting investments worldwide to do well as economies continue to improve in this post-pandemic era. The increase in tech stocks has added to the recent highs in the stock market. Their effect on the stock market and the longevity of investment remains to be seen.
While the pandemic has leveled the playing field for many countries economically, their ability to increase and maintain this will be interesting to watch. The global financial future may feel bleaker than before, but history has proven that economic turnaround here and globally can be surprising.
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