I think 2021 will see the beginning of one of the strongest runs for the economy ever. Alas, it will also be a time of extreme danger. This is why I think it’s time to plan ahead.
I am looking forward to the 2021 recovery. Investors should do the same
In times like these it’s difficult to plan more than a few weeks ahead. But then isn’t that the trick? Not many people are. The markets certainly aren’t. The UK government tried to plan ahead and got pilloried for it. But when I do think ahead, I get this sense of optimism, tinged with one enormous fear.
A couple of weeks ago I had a cold. For a few days I felt a bit rotten. Then for three or four days I got frustrated because it was taking longer than I had hoped for it to go away. Then, on a Saturday morning earlier this month, I discovered that it was completely gone. And I can’t tell you what a great feeling it was. We went out for a curry that night and had a pub lunch on the Sunday. For me it was VC day — victory over cold.
And that’s the great thing about a temporary illness. That’s even the great thing about an accident in which you sustain non permanent injuries — it feels wonderful when it’s over.
The here and now
Don’t get me wrong, probably just like you, I have a real sense of unease at the moment. It’s weird out there. It feels like the beginning of a science fiction film. I am also a tad scared — not for me, you understand, if the grim reaper wants me then he can have me, but for my family — I have two kids who are nurses (one of whom is expecting a baby) a wife who works in healthcare, and another daughter holidaying in Bali — and I am worried about them all.
In such circumstances, it is not so easy to plan for the recovery. But then in response to that, I would say that isn’t it the light that recovery promises that keeps us going through the hard times? Besides, as an investor, isn’t it the trick to keep your head while all around people have lost theirs.
That’s why I want to talk about next year — in part to cheer you up, in part because it’s my job to tell you if I think an opportunity is coming your way.
Don’t get me wrong, I think this crisis will drag on for many months. The Spanish Flu outbreak of 1918-1919, which claimed over 40 million lives, was at it’s worse with the second wave.
That’s what I fear will happen this time — not the same number of deaths of course, the fatality rate of Covid-19 is nothing like Spanish flu, but I do worry about the second wave of Covid-19, likely late autumn and early December this year. I note that the number of new cases in China has fallen to zero. I hope it stays like that, but I fear that the worst of this crisis is still six to nine months away. The markets have not yet priced this in.
But eventually there will be a vaccine, or cure. I suspect that will be around about this time next year — the delay relates to testing. I gather it takes 12-months to test a vaccine. Unless we can find a treatment for another condition that has been fully tested and happens to work for Covid-19, then spring 2021 is the likely date for a recovery.
But when the recovery comes, I think it will kick-off a truly great period for the economy. Right now, governments around the world are announcing the kind of stimulus packages that only usually occur in war-time. Well, we are at war.
And the first economics textbook I ever read had a nice graph at the beginning showing how economic boom often follows war.
Post-Second World War we had the strongest run of economic growth ever. I think it will be like that this time. Spring 2021 we will party like it’s VE Day. Then the economy will boom. It will be perfect timing. The Keynesian stimulus that governments provide as a result of Covid-19 will be exactly the shot in the arm that the fourth industrial revolution needs.
The 2020s will be one of the best decades for the Western economy (and probably global economy) ever.
For investors this will be an outstanding opportunity, just remember to invest at the moment when you feel especially gloomy.
But I have one very big doubt, actually I have two, but they are related.
Covid-19 won’t be the last coronavirus this decade. The twin pressures of climate change and demographics make this inevitable. In turn I fear a reaction to these threats, fashioned from latent racist beliefs, leading to a dangerous and self-destructive rise in xenophobia. A temporary shutdown of national borders is necessary. If this is taken by those who long to see a return of nationism — which is a close cousin of nationalism — and we see a drawbridge economy emerge, then the end result will be many times worse that what we are experiencing now.
As an investor I would say prepare for the opportunity. As a human being, I would say counter xenophobia, quickly contradict anyone who calls Covid-19 the China virus, and remind people that the West are among the worst culprits in the overuse of antibiotics, which pose a far greater threat than coronaviruses and that China can play a key role in combatting 21st Century health risks.
These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees