By most metrics, the U.S. economy seems to be making a comeback after taking a substantial hit in the early days of the pandemic. Part of the resurgence is fueled by the stimulus approved by Congress and delivered to Americans in 2020 and early 2021. The effects of the stimulus on the economy carry some valuable lessons for personal financial strategists in West Palm Beach. Here’s what you need to know.
Although we are not entirely through the pandemic, higher rates of vaccinations and easing restrictions have meant a resurgence for many industries. This is welcomed news for millions of Americans who suffered financially when the countless business shut down during the peak days of quarantine.
Brining an economy the size of the U.S. to a grinding halt has consequences, and mass unemployment and the enormous dips in the stock market were proof. Restarting such an economic behemoth, especially during a time in which millions were not able to return to work, required financial assistance unlike we have seen before.
The payments resulting from the CARES Act served to give those households affected by the loss of income much-needed relief to pay for essentials like food and utilities. Those households that did not need it saw themselves with extra spending money that vast numbers of people poured back into the economy. The stimulus had its intended purpose – to relieve economic pressure and kickstart an ailing economy.
Millions of Americans have embraced the new relief money resulting from the $1.9 trillion America Rescue Plan. They’ve been able to pay for utilities and put food on the table while looking for employment. Those who maintained their jobs throughout the pandemic have embraced the payout as well, but for different reasons. For them, it’s not about survival; it’s about ways to spend that lovely windfall.
It’s essential to recognize that the new stimulus bill, passed at the same time that vaccine distribution became widespread, is not just about helping households in financial distress. It’s also about jumpstarting the economy right about when people can get back out and find work. That’s why it’s called a stimulus bill — to stimulate spending. Households that need the money can spend it on consumer staples or pay down debt. [1]
If you’re looking to invest your stimulus money in an insurance or financial product, your best approach is to contact our personal financial strategists in West Palm Beach. We can conduct a comprehensive portfolio review and give you advice on the best way to position your assets for your financial goals. This is especially beneficial if you found that you have extra spending money after the stimulus checks came in, and here’s why:
Sectors and companies standing to benefit from the stimulus may be of particular interest to investors as we weave our way out of this health and economic crisis. Analysts at UBS Global Wealth Management expect capital to rotate out of tech and growth stocks and into cyclical sectors that benefit from higher growth and a steeper yield curve, including financials, industrials, and energy stocks.
Consumer discretionary stocks poised for growth include companies in the travel, leisure, and hospitality sectors, as well as Amazon. Unemployed workers will likely use enhanced jobless benefits to pay for rent, which benefits residential REIT. [2]
Even in the wake of a pandemic, there are always winners. For example, vaccine maker Moderna has been one of the highest performing stocks throughout the last year and a half. And now, the stimulus bill provides an additional $160 billion for vaccine development and distribution, which is a boon for pharmaceuticals.
Moving forward, investment analysts see underpriced “value stocks” gaining more momentum than growth stocks. While tech company stocks have soared during the pandemic, a virus-free country bodes well for airlines, hotel chains, movie theatres, and other industries shut out by social distancing restrictions. [3]
Ultimately, this means that there are countless opportunities to grow your wealth alongside the economy. However, this requires making well-informed decisions about which options make the most sense financially long-term. Limiting your risk while maximizing your profit requires professional advice from a personal financial strategist in West Palm Beach.
Regardless of what goods and services are purchased, the U.S. economy will benefit from households spending. The more consumer spending, the faster the economy can recover and grow. The more it grows, the more demand for consumer goods will increase jobs, and jobs create more spenders and taxpayers.
Increased sales and income taxes put more money in government coffers, which can then be used to pay down the debt acquired by the three stimulus bills passed during the pandemic. And this is the real key to the stimulus and why economists are optimistic about the effects. Not only have the checks triggered a 0.6% increase in economic output, but the wealth generated by the increased tax revenue ultimately pays for the stimulus itself.
A few key industries have significantly benefitted from the influx of money. Namely, restaurants and grocery stores have made substantial profits over the last year, in large part as a result of the payments. Owners of rented properties have also received much-needed assistance because as their tenants have received additional cash, they’ve been able to make their rent payments.
Furthermore, with each round of stimulus payments, more people have begun to pay off debt, save, and invest their remaining funds. This is money that is being circulated back into the market and boosting the growth of critical indexes. When we combine the decrease in debt and influx of money into industries in need, we can see why the economy has been able to bounce back at its current rate.
Allocating your money in the right places today can mean financial security in your future. Our team at Legacy Financial Partners is dedicated to helping your wealth grow and ensuring a lucrative return on your investments. Get in touch with us to learn more about our services!
Content prepared by Kara Stefan Communications. Edited and Optimized by Digital Resource.
1 Martha C. White. NBC News. Feb. 8, 2021. “Stimulus checks that don’t get used right away are still ‘economic rocket fuel,’ experts say.” https://www.nbcnews.com/business/economy/stimulus-checks-still-boost-economy-even-if-money-goes-savings-n1257073. Accessed March 15, 2021.
2 Palash Ghosh. Forbes. March 15, 2021. “Amazon, Six Flags, Square: Here Are The Stocks Ready To Rise Thanks To New Stimulus Checks.” https://www.forbes.com/sites/palashghosh/2021/03/15/amazon-six-flags-square-here-are-the-stocks-ready-to-rise-thanks-to-new-stimulus-checks/?sh=2ebd86071a29. Accessed March 15, 2021.
3 John Hyatt. Nasdaq. March 12, 2021. “What Biden’s $1.9T Stimulus Means for Investors.” https://www.nasdaq.com/articles/what-bidens-%241.9t-stimulus-means-for-investors-2021-03-12. Accessed March 15, 2021.
We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial or investment advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values.
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