by Sean Kelly
When we think of a “perfect storm,” we can’t help but recall the three massive weather systems that collided back in 1991 off the coast of New England, Nova Scotia, and Newfoundland. According to the National Weather Service, the event created a Nor’easter-type cyclone fueled by the Gulf Stream that emitted heavy rain, hurricane force winds, flooding, catastrophic storm surges and wave heights of over 60 feet.
A movie released back in 2000, detailed such an event. The story of the ill-fated Andrea Gail, a commercial fishing boat out of Gloucester, Massachusetts got caught up in the ferocity and was forever lost.
The term is now used to describe any rare or unusual combination of events that prove to be calamitous, even apocalyptic – like the current economy.
We’re living in an extraordinary economic moment. An unprecedented gathering of volatile currents, unstable air, and dense pressure systems are building up all around us. They’re upending our political system, disrupting national unity, and threatening our very way of life.
In the midst of an election year, we face the uncertainty of new leadership, dramatic policy changes, and a disruption to the world order.
More than anything, we have an unclear road map for the future which can suppress sentiment and dull economic expectations. Lest we forget that consumer confidence and associated spending represents 78% of GDP. Perhaps that’s why both the Dow and the S&P 500 tend to trend lower in presidential election years.
We’re also in a punishing political season where economic optimism and pessimism are starkly split along party lines. The animosity, disunity and discord directly impact legislative collaboration, policy making, and the forward thinking required to do the nation’s business. Partisanship has become a blood sport of allegation, denigration, and scandal where tearing down an opponent often comes at the price of undermining the economic potential of the country – even in the face of a cataclysmic crisis.
And we certainly have one. Call it a Black Swan, an inflection point, a watershed moment or a history-altering event. Pandemics are such things. The World Health Organization defines it as: “a new influenza virus that emerges and spreads around the world, and most people do not have immunity.” We also do not have a vaccine.
COVID-19 is not only a killer, it’s highly contagious and has caused dramatic changes to life as we know it – from travel, to worship, to education, to sports.
Quarantines, isolation and social distancing are now forcing the cancellation of parties, gatherings, graduations, vacations, and even trips the gym. We’ve been utterly transformed and so has the economy. The threat to the travel industry, cruise lines, restaurants, entertainment, sports establishments, small businesses, and of course the financial markets has reached dangerous levels.
The disruption, fallout, and long-term consequences of the virus could upend supply and demand, paralyze the manufacturing sector, spike unemployment, overwhelm health resources, exacerbate consumer and corporate debt, and dramatically increase uncertainty.
And to make matters worse, the Fed can do little to help after slashing rates to near zero on Sunday. They are, as many experts maintain, “Out of Ammo!”
Tele-health, tele-medicine and tele-debates are the new normal –and the coronavirus is likely to continue to infect the American psyche and weaken investor resolve long after it’s gone.
Don’t wait until the data is tallied, the damage is assessed, and quarterly GDP numbers roll in to safeguard your retirement. Adding gold to your portfolio now provides balance, risk protection, and an historic refuge from the crippling economic fallout to follow.
“The worst was yet to come, for germs would kill more people than bullets. By the time that last fever broke and the last quarantine sign came down, the world had lost 3-5% of its population.” Charles River Editors, The 1918 Spanish Flu Pandemic: The History and Legacy of the World’s Deadliest Influenza Outbreak