August 10, 2020 • By Xanat Hernandez
Throughout the coronavirus pandemic, Professor Chris Schwarz has held virtual Economic and Market Updates where he interprets the economic situation and provides insight on what may come next. On July 28, Schwarz held his sixth update of the year.
1. The next stimulus bill will be crucial to the economy
Pointing out that only 24% of businesses reported closed in April have re-opened as well as an unemployment rate in the double digits, Schwarz warns that a new stimulus bill is necessary to avoid permanent damage to the economy. As to which party has it right? “The Republican plan is probably not enough, and the Democrat is probably too much, so hopefully they can compromise down the middle,” he said.
2. It will be a rough ride until a vaccine
Schwarz says full economic recovery will be impossible until a vaccine becomes widely available, pointing to the recent outbreaks of COVID-19 across the nation that led to more shut-downs. In just one month, the U.S lost 6.7 million jobs according to census pulse data.
3. Invest in investment grade corporate bonds, foreign stocks
“The market is all kinds of expensive.” Without many viable options for investors, many people are turning to the stock market in search of higher dividends. With a reminder to consult your own investment adviser, Schwarz recommends corporate bond ETFs (LQD) as a good alternative.
Schwarz is also encouraged by foreign stocks. He says: “Places like Europe, Asia and Australia have coronavirus much better under control…there might be some good value there.”
4. Not the right time to invest in gold
Schwarz explains that though he recommended investing in gold back in January, prices are now very high. The right move is to pull back for now. “My particular concern with gold right now is—has it moved a little too far too fast?” he said.
5. Residential real estate is holding steady
Although in the last recession housing prices crashed, Schwarz is confident that this recession is different. Housing will remain strong due to low rates and inventory. “If you’re looking to refinance or are looking for low rates to buy a house, I’m not sure that rates are going any lower than this,” said Schwarz.