Long-Term Financial Impact of COVID-19

Long-Term Financial Impact of COVID-19

As bad as the economy is right now due to the COVID outbreak in the United States, many economists are predicting that the long-term outlook is much bleaker. Congress and the Federal Reserve’s efforts at stimulus and interest rate management have done much to keep the economy and stock market afloat; however, small businesses – the backbone of America’s employment growth – are closing every day. As consumer spending reduces further, the impact will likely affect Wall Street. Consequently, share prices may soon begin correcting to reflect the future more so than the present. 

It should come as no surprise, then, that 88 percent of respondents admit they are worried about their finances, according to a recent survey conducted by the National Endowment for Financial Education. 

This economic decline has presented an interesting mix of demographics who have been or will be affected the most over the long term. For instance, many low-income workers have remained employed throughout the pandemic because their jobs are considered “essential services.” This includes check-out clerks at grocery stores, laborers who work outdoor jobs, nurses, orderlies, and nursing home attendants. 

By contrast, many white-collar business owners – such as physicians and dentists– closed shop for a few months and/or have reduced the number of patients they see. Alas, 79 percent of those surveyed with a household income of more than $100,000 a year said they were at least somewhat concerned about their financial situation. 

Millennials are the generation most likely to change the way they manage their finances in the future. Although many have remained employed in white-collar jobs – primarily due to their technology-enhanced skills and knowledge – they have reason to be concerned. After all, this generation has already lived through the market downturn following 9/11, the Great Recession, and now a historic economic decline caused by the coronavirus. After finally gaining a foothold in their careers, this recent downturn obliterated the last five years' worth of economic growth. Going forward, finance experts predict that these young adults will be more focused on stock-piling savings, buying modest homes when the real estate market corrects, and generally working on a long-term plan for financial stability. 

While those strategies are mostly good, it’s a shame this generation had to learn the hard way – all while encumbered with historically unprecedented student loan debt. However, as these lessons are passed down through generations – much the way the Great Depression had a lasting impact on the Silent Generation – U.S. populations may see higher savings rates at the expense of lower GDP growth. 

For households recovering from financial stress or looking to create a plan for stronger financial resiliency no matter what the future holds, consider the following strategies: 

  • First priority: Save from three to six months' worth of liquid, emergency funds should you encounter a large expense, such as an auto repair or a temporary loss of income.
  • Learn how to budget effectively, which includes examining if you overpay for basic household needs or do not know how much of your income is spent superfluously every month.
  • Take stock of the full scope of your financial resources, including:¬†
    • Savings accounts
    • Investment accounts
    • Retirement accounts
    • Health savings accounts
    • College savings accounts
    • Whole life insurance
    • Real property
    • Structured settlements
    • Vehicles (auto, boat, motorcycle, recreational)
    • Art, jewelry, wine, or other high-value collectibles
    • Expensive furnishings and household items¬†
  • Develop a Plan B to help supplement any income loss right now, a Plan C to help bolster your savings rate once you‚Äôre back to full income, and a Plan D strategy for income replacement in case you‚Äôre ever in a situation like this again.¬†

Financial setbacks will come and go; it’s the lessons we learn from them that should have the most staying power.

 

How Will Monetary Policy Impact Markets Going Forward?

How Will Monetary Policy Impact Markets Going Forward?

With gold hitting $2,000 an ounce in recent days, coupled with the Federal Reserve's monetary policy creating a lot of liquidity, how will markets perform for the rest of 2020 and beyond?

Based on a reading of the Federal Reserve's minutes from its July 28 to July 29 meeting, the Fed remarked that the ongoing pandemic would continue to put a strain on the economy, slowing expansion and causing additional damage to the country’s monetary framework.

The Fed highlighted the nation’s GDP drop by 32.9 percent in the second quarter. While Q3 growth is expected to be positive, that was not quantified. Additionally, the Federal government’s debt has grown by $3 trillion since the onset of COVID-19, reaching $26.6 trillion. The release of these minutes sent stock prices downward and helped the U.S. dollar gain.

Forward guidance or communication to the general public and business owners of the Fed's goals for inflation and unemployment target figures could be upgraded, but no time frame was given. More details on how the target range for the federal funds rate's path would be appropriate at some point, per the Federal Open Market Committee's (FOMC) minutes. How the target range of the federal funds rate evolves is outcome-based or based upon meeting certain economic goals before rates see further movement. For now, The Fed's mandate is to ensure full employment and price stability.

The FOMC is expected to keep the current overnight borrowing rate between 0 percent and 0.25 percent until the U.S. economy has emerged from its current situation and on course to achieve the Committee’s maximum employment and price stability goals.

The July meeting kept short-term interest rates at near-zero because the economy is still not at its pre-pandemic economic activity levels. Given that COVID-19 has already impacted the jobs picture, the value of the U.S. dollar, and how well the economy is functioning already in the near term, the FOMC see the pandemic continuing to impact economic growth in the medium term.

The Fed remarked that the U.S. Congress needs to pass another economic stimulus plan, especially when it comes to renewing unemployment insurance that recently expired. The FOMC meeting also noted that the Fed is not expected to purchase bonds to control yields on government bonds. However, it did speak to how it has played a role in buying bonds on the open market to support liquidity during the COVID-19 pandemic. 

The meeting also determined that bond purchases by the Fed grew by more than $2.5 trillion, increasing to $7 trillion – up from $4.4 trillion over the course of the coronavirus pandemic. While skepticism by the Fed’s FOMC members regarding the use of purchasing bonds to manipulate the government bond yield curve wasn’t given much consideration, it’s still noteworthy to explain this versus what many refer to as quantitative easing or QE.

If the Fed’s efforts to bring down short-term interest rates, the rate that banks earn on overnight deposits, to zero with no positive economic effects, another tool the Fed has is Yield Curve Control (YCC). Whatever longer-term rate the Fed has in mind, YCC would involve an ongoing campaign of buying long-term bonds to maintain rates below its target rate by increasing the bond’s price and lowering the bond’s longer-term rates.

This is in contrast to QE, where the Fed purchases a fixed amount of bonds from the open market. It’s done by central banks to increase the money supply in hopes of spurring spending and investing by Main Street. It’s an important tool that central banks rely on when rates are at or near zero. This helps banks with their reserve requirements, giving them more liquidity to provide more loans to consumers and commercial borrowers.

Quantitative Easing Considerations

As central banks increase the money supply, it can create inflation. If it does create inflation, but there's no measurable economic growth, this can lead to stagflation.

It is noteworthy that QE and the resulting lending attempt to stimulate the economy is effective only if individuals and commercial operations take loans and use them to spend and invest in the economy.

QE also can devalue the currency. It can help domestic manufacturers export goods (because the currency is cheaper), and anything that's imported is more expensive. Consumers are hit with higher prices for imported goods, along with domestic producers using higher-priced imported raw materials for their final products.

With the economy still facing the headwinds of the COVID-19 pandemic, the Fed has played a major role in stabilizing the economy. While the increase of liquidity has certainly provided a lifeline for the markets, the price of gold can be seen as a hedge against this liquidity – with inflation as one potential outcome. For the rest of 2020, The Fed will be ready and able to assist the markets but will leave lingering questions about the value of U.S. and other global currencies.

Your New Job Checklist

Starting a new job can be intimidating. You are faced with new coworkers, new responsibilities, new facilities, and new technologies—it can be a lot. Today we want to offer some helpful tips for making your transition into a new workplace as smooth as possible.

If you are struggling with new job jitters—or if you simply want to make sure to make the best impression possible—consider the following tips:

  1. Introduce Yourself to the Office – Before arriving at the office, mentally prepare yourself to make a lot of introductions. While your new teammates will likely not expect you to remember everyone’s names and roles right off the bat, you should make an effort to learn them as quickly as possible. Be sure to pay particular attention to two groups: company key players and the colleagues with whom you will be working closely.
  2. Establish New Relationships – This tip applies particularly to the teammates in your area or department. Try to learn a few things about each of the people you will work most closely with. This will help you to relate to them more quickly, to remember them more easily, and to build a rapport with them more rapidly. At the same time, getting to know the people around you will help you develop a sense of the company culture and community at your new organization.
  3. Update Your LinkedIn Page – Do not be shy about letting your professional network know about your new position! Update your profile and start to connect with your new colleagues. This will help you immensely with the task of learning everyone’s names and roles.
  4. Ask Questions – Especially during your first day and week, people will expect you to have a lot of questions and, for the most part, will be eager to be helpful. Try to prepare some questions in advance of your first day, then carry a notepad and pen with you to jot down anything questions that come up while in the office.
  5. Learn the Lay of the Land – Ask for a tour of the office building where you will be working. Make sure you learn the location of key areas, such as bathrooms, coffee and water sources, stairs and elevators, the break room or lunchroom, and any other amenities.
  6. Complete Any Paperwork – Lastly, strive to complete any employment paperwork as soon as possible. On your first day, bring your ID and any other key documents with you. Be sure to review all onboarding materials you are given, such as the employee handbook, list of company policies, benefits packet, and employment contract.

Starting a new job or internship can feel overwhelming. Having a plan in place and an idea of what to expect and what you need to learn can go a long way in smoothing the path before you. 

Main Street Loans Opening Up for Smaller Businesses

Main Street Loans Opening Up for Smaller Businesses

This article discusses the most recent announcement from the Federal Reserve Board. This is significant for small businesses because the minimum loan amount went from $250,000 to $100,000 on three Main Street loan facilities. Additionally, they published a frequently asked clarification document that answers questions concerning the paycheck protection program. Be sure to check out this link for more information!

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Why Hiring a Tax Accountant is Good for Small Business

Why Hiring a Tax Accountant is Good for Small Business

This article discusses how, although hiring a CPA for your small business comes with a cost, the pros may outweigh the cons in this situation. For example, hiring a CPA will allow you to save precious time and can be used as a trusted source for support. Additionally, your accountant can help you with all finance-related work as well as offer advice on a daily basis. Be sure to check out this article for more details!

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Reynolds, Bone & Griesbeck PLC Announces New Audit Staff

Reynolds, Bone & Griesbeck PLC Announces New Audit Staff

Reynolds, Bone & Griesbeck PLC (RBG) is pleased to announce the addition of Christopher Nation to their professional team. 

Nation joins the firm’s audit team. He works primarily with clients in the dealership and manufacturing and distribution sectors. A professional in the accounting field since 2015, Nation most recently worked as a senior assurance associate. He also previously served as a specialist in the U.S. Army. 

A magna cum laude graduate of Azusa Pacific University, Nation holds a bachelor degree in Accounting. He currently lives in Hernando, Mississippi. 

“It is my pleasure to welcome Chris to the RBG team,” said Skeet Haag, CPA, managing partner of RBG. “I am excited to have Chris joining our Audit Department and look forward to working with him.”

Unclaimed Property Distributions Allowed As Self-Certified Rollovers

Unclaimed Property Distributions Allowed As Self-Certified Rollovers

The article discusses a recent publication from the IRS in response to multiple requests from stakeholders asking for guidance on self-certifications. Additionally, it outlines what is required within the report as well as the effective dates of this revision. Check out this article for more information!

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How to Handle Tricky Colleagues

As a professional, it is very likely that at some point in your career you have had to—or will have to—work with a difficult colleague. For the sake of your job, you need to be able to handle maintaining a workable relationship in spite of any tension between yourself and your coworker. Read on for some helpful tips on handling tricky teammates. 

Tips for Handling Coworker Conflict

When you find yourself clashing with another member of your team, it can be difficult to approach the situation with a calm and clear head. Follow these steps to successfully work your way through the conflict:

  1. Check Yourself – The first step is to take the time to do a self-evaluation of your role in the situation. If you are worked up or angry, calm yourself down. Consider the things that you know that push your buttons and whether or not they might play a role in what is happening. What might you have done to contribute to the difficult situation at hand?
  2. Consider Your Colleague’s Situation – Take some time to consider and evaluate exactly what seems to be happening between yourself and your colleague. Try to see things from their perspective and understand their intentions. Think about what exactly it is that makes working with them or interacting with them difficult.
  3. Get Some Perspective – Once you have spent some time mulling over how both your colleague and yourself might be contributing to the difficult situation, reach out to a trusted friend or colleague to get some perspective. If they are already familiar with the situation and/or your troublesome teammate, they might already have some thoughts about what is happening. If they are outside of your organization and are unfamiliar with what has been going on and the people involved, strive to be as accurate and unbiased in describing the situation in order to paint as clear a picture as possible.
  4. Connect With the Tricky Colleague – This is one of the hardest steps: confronting the issues head on. If possible, talk with your teammate directly. Calmly explain where you are coming from and describe your perception of the situation. Allow them the space to do the same. A couple more helpful tips in this area include:
    • Ask a neutral moderator to observe or guide the conversation
    • Strive to build a better rapport with the tricky colleague outside of the direct confrontation: learn more about them personally, find something humorous to share, etc.
    • Try your best to always remain respectful during any interactions that you have

If this process does not work for you, or if the situation escalates, there are some alternative steps to consider. If the troublesome coworker’s behavior is irritating but not serious, consider simply ignoring it and saving your fight for issues that matter more. If you take this tack, you can still strive to build a good rapport with your colleague and hope that the issue resolves in the future. Alternatively, if the situation is more serious than you feel comfortable handling alone, consider whether it is time to escalate to a higher authority within your organization. 

Reynolds, Bone & Griesbeck PLC Announces New Audit Staff

Reynolds, Bone & Griesbeck PLC Announces New Audit Staff

Reynolds, Bone & Griesbeck PLC (RBG) is pleased to announce the addition of Mitch West, CPA to their professional team. West joins the firm’s financial institutions team as an audit staff.   

West attended Mississippi College, earning a bachelor’s degree in Finance in 2016 and a Master of Business Administration in 2017. Prior to joining RBG, Mitch worked for the Mississippi Department of Banking and Consumer Finance as a Bank Examiner. Originally from Batesville, Mississippi, West and his wife currently live in Memphis. 

“I am excited to extend a warm welcome to Mitch as he joins the RBG team,” said Skeet Haag, CPA, managing partner of RBG. “He is an exciting addition to our team and I look forward to seeing his experience and talent benefit both our clients and staff.” 

Fighting Financial Fraud

Fighting Financial Fraud

This article discusses how the coronavirus pandemic, and in particular, telecommuting, has raised a new set of problems for managers in terms of company fraud. Working from home has its benefits, but as a company owner or manager, it also has a lot of risks. Tools to fight fraud have been increasing through the years, but now more than ever, your company can benefit from understanding these tools and utilizing them in your business. Check out this article for more details.

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