Every quarter I like to take a moment and summarize questions I am most often asked. Perhaps you may have wondered about one of these items as well.
1. What’s the future for inflation in the United States?
Inflation will almost certainly rise but not to a level that will be alarming. An avalanche of stimulus money will help propel the economy forward but probably not enough to overcome COVID damage. The current administration, as well as the Federal Reserve, have already stated they will allow inflation to run as they attempt to get the economy back on track.
2. Will the stock market go up or down this year?
Before I answer, let me say that anyone who says they know is simply guessing. My guess is the market will be supportive of new COVID stimulus money inserted in the economy as well as an infrastructure bill. I expect a reasonable year in the equity markets. I also expect significant volatility so be prepared for that.
3. I noticed Bitcoin is rising a lot. Are we planning on buying it anytime soon?
We have a number of positions in our portfolios that are focused on block chain technology and its application in business. This is related to Bitcoin, but it’s really just the underlying technology. Bitcoin is a currency based on the concept of scarcity with no inherent valuation mechanism to judge it’s worth. Bitcoin transacts in a non-transparent trading market and we do not anticipate buying cryptocurrency directly.
4. Did a lot of people invest in the GameStop trade when it was at a high price?
We estimate that over 750,000 people bought when it was greater than $300 a share. Yikes.
5. Residential real estate seems to be red hot nowadays. Do you think that will continue?
Residential real estate will likely experience the same demand as equities are experiencing as money is inserted into the system through stimulus spending and ultra-low interest rates. Commercial real estate will likely continue to be a challenge particularly space focused on office occupancy.
It is important to remember, however, if one is investing in investment real estate, cash flow is critical. Do not speculate on values without taking into account cash flow if you are buying investment real estate; that was a mistake people made in 2007. Economic common sense must rule any real estate investment decision.
6. How has DWM been doing working remotely during this pandemic?
It really has been a pretty seamless process for us as we were well prepared to respond to an emergency situation. Our office went 100% remote immediately after the stay-at-home order first came out last year. We anticipate returning to the office at some point when the risk levels decrease. By the way, if you’ve never seen a tour of our office, click here to take a quick walk-through.
7. I keep hearing international investments are poised to make a comeback. Do you agree?
We continue to believe that buying multinational companies based in the US gives you the opportunity to participate in international growth without as much currency risk or political uncertainty. While we do have some international investments (defined as companies domiciled outside of the United States), most of our assets are US-based. We expect that to continue.
8. Are there any permanent changes you see occurring as a result of this pandemic crisis?
Yes. Here are a few:
- Work from home will become a permanent part of the business world.
- Pharmaceutical companies will become valued by the public as a first line of defense against virus outbreaks.
- Deficit spending will become the norm.
- Travel will change but still be a part of people’s lives despite the current challenges.
- Streaming services will continue to rise, and movie theaters will become more event-oriented venues.
- Malls will transition to also be restaurant venues and likely some will be converted to office space.
- Masks won’t be going away.
- Health services will be permanently changed with the virtual visits becoming more accepted.
9. When will the United States get back to normal?
After July, when vaccines have become more widely received, some sense of normalcy should begin to return. It’s going to be a slow recovery. I expect 2021 to be a transition year and would not expect a more normal environment until next year.
10. Will there be a change in tax law this year?
I expect there will be. All the CFP® professionals at DWM are watching carefully and we will be advising appropriate adjustments based on post and passed legislation. Financial planning has never been more important, and as a client of DWM, you are eligible to receive complimentary financial planning services at no additional cost.
As awful as the last year has been, we are focused as always on a long-term perspective. For that reason, we are confident we will get through this pandemic crisis. Despite the horrible toll on human life and the economic cataclysmic consequences of this pandemic, we will recover.
The United States is uniquely positioned to recover in a way that will make all Americans proud. Let’s stay focused on the future. From my perspective, the future is filled with opportunity and recovery.