How Covid DID change investing
Each market crash changes the investing landscape in different ways.
The US government usually passes laws. These laws are intended to do good, and they usually do in many ways, but they have also have unintended consequences down the line that may not be good.
- Their housing market was overbuild.
- The government cracked down technology.
- Government cracked down on listings overseas
1. Bonds bonds bonds
With inflation out of control the FED feels the need to raise the interest rate.
Which in turn raises US Treasury bond yields.
US Treasuries not pay a decent yield and more and more investors are adding bonds into their portfolios.
2. No more cheap real estate loans
High interest rates means that US consumers can no longer afford new home loans.
3. Free money
The government sends checks to individuals which then were invested into the market, inflating the money in the stock market.
4. Inflation - Your money is worth less
Printing trillions of dollars may have dropped the value of current dollars.
But also the supply chain, china slowdown and Russia war.
5. Biotech forever
Creating a vaccine became the most important thing in the world.
Biotech funding advanced dramatically. New drugs will be developed.
Governments prioritize paying for drugs now.
Biotech companies are now essential and have a steady revenue stream. There will be a lot more medical advancements because we developed the Covid vaccine relatively quickly.
6. The New Normal
Everyone became ok with wearing a mask and working from home.
Have things delivered to the home.
Do I really need to call that person back? No not right now.
Remote work is finally acceptable making workers lives a tiny bit easier.
The tech companies: Uber, Peloton, DoorDash suddenly became household names that everyone was comfortable using. Anything that helped workers do remote work. This was reflected in their stock price.
7. The Rise of the Individual Investor
GME, AMC, BBBY
Individuals we're able to organize in the same scale as large institutions. This organization allowed some business to stay alive. Even though the stock price was divorced from performance.
Did this change how the big investors work or their influence on the market.
But it should the world that it is possible for everyday Americans to organize online and have an effect on the market. Maybe this will happen more often in the future.
8. The Fall of the Big Boys
When the tide went out a lot of companies were swimming naked.
Every major company had their out for government money. Many of them got it.
But it also showed investors which businesses are uninvestable. Cough airlines cough
9. The Importance of Diversification
Diversification is important for wealth preservation.
Tech stocks boomed. Travel and energy plummeted, but if you invested in both it would not have been too bad.
10. The Power of Patience
If you are patient the tide will turn. But most people cannot afford patience. The FED waited too long to raise interest rates and now they have to raise them fast.
We live in the Tik Tok age. We needed a vaccine now. And the government responded quickly with free money to citizen while the country shut down.
Patience still produces dividends.
Covid is forcing investors to be more patient. The economy is headed downhill right now. Investors are going to have to wait a while before stocks come roaring back to life.
11. Economic fall, rise, fall
Covid changed the total direction of the market.
For years the market steadily went up. Covid made the market plummet and then the government intervened and the market went up.
Now the free money is drying up and the market is back down. And it looks like we are headed for recession.
Consumers are still spending, but how long will that last?
How high will interest rates go?
12. Hello Biden and infrastructure
Trump was on his way out and Biden on his way in. Without Covid we would not have gotten the infrastructure bill. Infrastructure is a way for the government to create jobs that would not have been created otherwise.
Biden saw an opportunity to take credit for passing a bill and seized it.
I'm not saying the bill is good or bad. Now it is a reality. And then once the infrastructure is built it will need to be maintained.
13. Travel forever
I just came back from Hawaii. Air travel to those islands is essential.
Every travel company was shut down during Covid. But the travel industry employs millions of people. Those people vote.
Covid made travel companies: airlines, hotels, cruises etc. essential businesses. If something ever threatens those the government will step in.
What does this have to do with investing?
Investing into travel might not get you big returns, but your money is safe. And travel businesses will benefit from the infrastructure bill.
And those government loans may be used to expand travel services in the long run.
I would still stay away from investing into travel business. It's always something with them.
14. Bigger divide
Covid and maybe Jan. 6 divided the country even more than it was. Vaccines were suddenly political.
Dont follow the herd. Don't invest based on political beliefs. Invest based on what you think will do well over the long run.
15. China even more uninvestable
China has some major economic challenges.
The biggest problem is the government response to the virus. Total lockdowns. That means no economic activity in any city that has a single Covid case. They must not be able to produce a viable vaccine and will not let their population take the western vaccines.
There is no way western investors should be investing into a once promising economic environment.