News & Insights
May 12th, 2020

The Impact of Social Distancing

For the past several weeks, people across the country have been asked to stay home to flatten the COVID-19 curve. Airports are empty, shopping malls have closed, and if you crave a meal from your favorite restaurant, you’ll have to settle for curbside pickup.  We’ve witnessed how our local communities have been disrupted by social distancing; but does it affect your investment portfolio as you might expect?

 

Measuring the Impact

Not surprisingly, the service industry has been hardest hit by this health crisis. In particular, the five sectors most impacted by COVID-19 include: Hotels and Tourism, Transportation (Airlines and Cruises), Entertainment, Restaurants and Bars and Retail (excluding Food and Beverage).

In 2019, these sectors totaled $4,171 billion in consumer spending (or 19% of Gross Domestic Product) and accounted for 30.8 million (or 20%) of payroll jobs. However, for a more complete picture, we look at corporate profitability, where these same sectors only accounted for 7% of S&P 500 corporate operating earnings on a per-share basis.

 

 

The Principles of Investing Have Not Changed 

The first quarter of the year was extremely volatile, and we expect this volatility will continue. However, the financial markets have experienced volatility many times before. Each year there are winning asset classes as well as underperformers. We still believe in the proven “old fashioned” approach of buying when assets (and emotions) are down and selling when assets (and emotions) are up. These principles of investing still apply, and we will continue to take a long-term diversified approach that includes periodic rebalancing of client portfolios. We always welcome the opportunity to discuss your financial plan, so you remain confident that you are on the right path.

 

Learn More

For additional information on social distancing and our current investment outlook, please view our latest webinar. In addition, while we have spoken with many of you frequently during this challenging time, Principle Wealth Partners is always available to connect with you virtually and answer any questions you may have. We look forward to a time when we can meet again in person.