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North American markets today, Monday, viewed several hours before opening at 9:30 a.m. EST look poised for a strong start with all major indicators in the United States and Canada firmly in the green. The safe havens of gold and silver are also in the green and the British pound and Canadian dollar are also up at time of writing. The Euro is down marginally.
The optimism flows in part from the United States House of Representatives’ Saturday morning vote to approve President Joe Biden’s $1.9 trillion American Rescue Plan Act. The bill now goes to the Senate and if passed will put more much-needed money into consumers’ hands.
Moreover, the Food and Drug Administration’s approval of Johnson & Johnson’s new so-called one-and-done vaccine means that more individuals will get vaccinations sooner.
If J&J makes good on its promises, the implications for the recovery are enormous. The company has said it can make 100 million doses available by the end of June with some shipments expected by next week. The United Kingdom, Canada and the European Union have also ordered large quantities.
For another look at the effects of the pandemic, Zoom Video Communications Inc. reports fourth quarter results today. In anticipation of a positive report, its shares increased by $8.88 on Friday to close at $373.61 in an otherwise rocky day in the markets.
Zoom has become inextricably linked with our work and personal lives during the crisis. “Zoom remains the poster child for ‘work from home’ names,” explains Dan Ives, Managing Director of Equity Research at Wedbush Securities in New York. “And we expect the eye- popping strength to continue with earnings Monday after the bell.”
For a look at the retail sector, Costco Wholesale Corp. posts its second quarter results on Wednesday. Target Corp reports fourth quarter results, also on Wednesday boosted by its delivery service and increased demand for home goods and electronics, driven by stay-at-home restrictions.
Kroger Co. reports fourth quarter results on Thursday, likely showing continued high demand for groceries during the crisis.
Also, on Wednesday Dollar Tree Inc. reports with increased sales expected.
At the same time, Kohl’s Corp. looks likely to post a decline when it reports fourth quarter results tomorrow, dragged down by reduced demand for apparel and other discretionary items during the crisis.
With all of these companies, investors will be curious about the outlook for sales levels and how demand may change as vaccines take hold and we move to a new normal.
The increasing optimism over the availability of vaccines and the – albeit bumpy – road to recovery suggest a long list of investment questions to be considered as we contemplate the post-COVID world and I can only cover a few of them here.
Any one of them merits an extra call to a financial advisor.
Ives says that the Street projects some moderation of growth in Zoom after this year and into 2022 as vaccines are widely administered and at least some employees return to offices after this Summer. Still, its place as a core part of consumer and work environments has become assured and Wedbush projects that 30% -40% of employees currently working from remote locations will continue even after the crisis.
That change may affect another one for many: retirement. The concept was undergoing change even before the pandemic, but the crisis hastened the process. Some will want to continue working because being freed from the daily commute has made continued employment more appealing. In some cases, the appeal of retirement was that freedom more than being free of work obligations.
Moreover, at least one standard retirement pastime – cruising – will remain suspect for many who had watched those commercials showing travelers being served drinks on a sunny ocean liner deck.
Others will want to continue working if their portfolios were impacted by the crisis or if they were affected by layoffs or furloughs. Those that continue working because they choose to do so will have income they had not previously anticipated and could discuss investing part or all of it with their advisors. Those who were fired or furloughed may have had to dip into their retirement savings and now feel they need to repair the damage.
At the other end of the retirement spectrum some who have otherwise secure employment such as educators and healthcare professionals may have gotten to the ‘enough is enough’ stage and decided to take early retirement.
In all of these cases, a conversation with a financial advisor about portfolio adjustment may be appropriate.
Still, planning for the post-COVID world can only go so far at this early date. As some shift from surviving the pandemic to investing for the new world there are several questions that – again – could fuel conversations between advisor and client.
We still don’t know the actual timeline and set-backs remain likely, suggests Jay Nash, Senior Vice President and Portfolio manager at National Bank Financial in London. Nash says that the unknown schedule presents significant risks if a portfolio is rebalanced too dramatically for future conditions versus where we are now.
Moreover, some stocks are already at pre-COVID levels meaning that there is only limited room for further appreciation in the absence of improvements in the companies’ profitability he says.
Finally, a third wave and serious impact from variants could throw off planning.
In many cases portfolio changes are warranted, but adjustments should be moderate at this time. “Those rushing back into sectors like travel or hospitality could be left out if reopening includes continued restrictions,” Nash suggests. “Many segments of the population will not be vaccinated for many months and this will influence any change in restrictions around the world.”
While portfolio changes will be appropriate in many cases it’s too soon to suggest the amount and depth of the changes, except to say that a serious conversation with a financial advisor might be constructive. These factors are subsets in a larger and very confusing post-COVID picture and a knowledgeable advisor can assist a client by sorting them out.
“While it’s fair to say that those who move into the right sectors can benefit the most, those who make the wrong call on how the world will re-open could be left will a non-performing portfolio,” Nash says.
Disclosure: I am not a financial advisor looking to recruit new clients – though I can appreciate that that impression might be created. Instead as a financial journalist I have interviewed upwards of 300 licensed advisors in several countries. Ideally their role amounts to looking after a client’s financial health in the same way that a doctor looks after the person’s physical health.