The investing world is certainly an interesting place. Pre-pandemic, the economy was moving along quite nicely. Unemployment was historically low and the Federal Reserve was keeping interest rates low.
The COVID-19 pandemic changed everything. The lockdowns imposed on the economy to inhibit the spread of the virus were much like an induced coma for the economy. Production plummeted, consumption fell--except for consumer staples like toilet paper and food. Drive-throughs at quick service restaurants boomed. Chick-fil-A per store sales galloped to new industry highs.
Many people were idled at home. Daytrading and investing in meme stocks like AMC and Gamestop brought many bright, young investors into the market. Robinhood, Webull and Schwab added millions of new accounts.
As the vaccines were developed and distributed in record time we now find ourselves almost post-pandemic. New variants of the virus can be problematic, but most likely we will not have to isolate and lock down again.
The economy is opening up again, people are shopping and dining out...life is returning to (mostly) normal.
However, investors now find themselves in a situation most have never experienced before. Prices have surged and inflation is raging...at least for the moment. Why is this?
The immediate answer is simple. When the economy was shut down and production greatly diminished, goods and services were produced to a far lesser degree. Now that demand has returned with a vengeance, supply of these goods and services are really struggling to keep up. Housing, automobiles, food, you name it, have greatly increased in price. The most recent numbers on consumer and producer prices have been eye-popping -- in other words, really high.
Jerome Powell, Chairman of the U.S. Federal Reserve Bank, thinks this inflation will be temporary. He may be correct. However, when prices rise as they have, they tend to stick to their new, higher levels for some time.
How do we invest into this new, post-pandemic world? Look to invest in things that will gain value in a possibly sustained inflationary environment. Additionally, look at things that will pay a steady, increasing cash flow (dividends and/or rental income). Yield income continues to be very hard to find. Take a look at RealyInvest’s offerings for this kind of post-pandemic investing.
Generally speaking, cash loses value over time and hard assets like higher quality real estate gain value over time.
There are lots of interesting, fun and lucrative ways to invest in our post-pandemic economy. It’s OK to start small...but start today!
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