‘Don’t panic,’ save, invest: Financial lessons learned continue for second pandemic year
2021 is already beginning to look like a new landscape to financial industry wonks.
A new Democratic administration is about to usher into the U.S. Treasury secretary role San Francisco Bay Area’s own economic giant and former Federal Reserve chief Janet Yellen, who has already provided a glimpse of where she’s leaning on federal economic policy.
She wants to go big in stimulus for relief — by pouring money into the economy while increasing public debt.
To North Bay wealth managers like JDH Wealth adviser Matthew Delaney, who watches the U.S. financial picture, this theory of how to emerge from this crisis may serve as a double-edged sword.
“I think we’re in a tough spot because you look at all the pain our area has endured. Just look at the restaurants that put out so much money, then they were shut down,” he said. “We want to get checks out to people, but we don’t want to cripple our children with debt.”
Indeed, it’s a balancing act for the federal government to consider placing another $1.9 trillion into a major stimulus plan on top of the trillions already spent last year.
“It’s like we’ve become numb to government spending now, whether (the number) starts with a ‘M,’ ‘B’ or ‘T,’” he said, referring to millions, billions and trillions. “Once we have the bailouts, we need to think about how to reign in spending.”
The U.S. government deficit for the last three months has surged by 60% to a record-breaking $572.9 billion in this budget year that ended in December, the U.S. Treasury Department reported.
“I think 2020 taught people to expect the unexpected, but I think now people should focus on how to live within their means,” he said.
‘Don’t panic’ became the watchwords for 2020 and will apply to 2021 as well.
“Some people panicked and went to cash instead of investing, saying: ‘I just want to be stable and go back to February (2020),’” Delaney said.
But there lies the problem. There will always be “something lurking,” according to Delaney.
The wealth manager accused amateur investors of being wound up too tight with their money in troubling times, a tendency that leads to their downfalls instead of making investments work harder for them.
“They need to lose the emotional attachment,” he said, labeling himself a “financial quarterback” for clients seeking advice in a complicated world. “Making adjustments now will make all the difference in the world. This is a moment of clarity.”
Delaney has been heartened at seeing younger people “more mindful of saving” — especially when it comes to taking advantage of a company’s 401k program.
“I say: ‘If you remember one thing, it’s to get the free money on the table,’” he said, further delivering an added endorsement for companies to offer the standard 5% match.
Moving wealth from Sonoma to Marin counties
Another area of optimism the North Bay should take to heart is the sheer amount of wealth in the area, Bruce Raabe of Relevant Wealth in Mill Valley highlighted.
And that wealth combined with heightened innovation may turn into investment.
“We’re fortunate we have so much wealth in the North Bay. We’re lucky we live where we live,” he said
He said hospitality, travel and food industries “are the fragile parts of our economy, but I see a major shift, particularly in the North Bay, to technology and entrepreneurship.”
Other positives are the construction industry remaining strong and the migration of talent and real estate dollars from San Francisco and the South Bay into the North Bay.
“It’s easy to look back and be critical, but frankly, this is an exciting time for the U.S. with a new administration. I think 2021 will be a promising year.”
Granted, Raabe predicts 2021 will start a recovery, but it won’t end there.
“The vaccine is key,” he said.
In the meantime, many consumers who haven’t fallen into a category of devastation have hoarded money they’re itching to spend, he notes.
“There’s so much money that’s been saved up with pent-up demand, and they’re going to want to spend in a big way,” Raabe said of consumers.
Neighbors sending money into other community members’ business coffers represents another tool to good economic health once regions start opening up.
“I think there are clear themes — sustainability and balance. No longer does bigger mean better. The sustainability of Amazon doesn’t necessarily help (our area),” Encore wealth manager David Brown said. “We’ve got small business owners barely squeaking by. We just gotta get passed COVID.”
Banking on small business overcoming obstacles
Low interest rates can represent a bane and a blessing between customers and banks — but that indirect stimulus may just serve as one shot in the arm for industries needing businesses and individuals to survive this crisis.
