Forever standing on the side of our clients..especially now. See resources we have developed to help through this COVID-19 crisis. Learn More

The economic data like unemployment and productivity is looking bleak. How bad will it get?

It seems like each week brings a new set of miserable metrics. From unemployment stats to crazy oil prices and everything in between, Larry Swedroe provides prospective on how to process the data points.

Transcript

Tim Maurer:
Hello and thank you for tuning into Ask Buckingham, an ongoing video podcast series where we invite thought leaders across many disciplines and wealth management to respond to the questions on your mind. My name is Tim Mauser, and I have the privilege of hosting these short Q and A discussions as the director of advisor development for Buckingham Wealth Partners. Today we’ll be hearing from Larry Swed roe, Buckingham’s chief research officer, and here’s the question we’ll be tackling. Larry, we’re already seeing predictions of scary economic data coming out regarding stuff like jobless claims and productivity and manufacturing with so much shutting down in commerce in the world, what do you expect to see from this new economic data?

Larry Swedroe:
Yeah, well, there’s no question, Tim, we’re going to see some pretty scary numbers because the economy is virtually shutting down in certain areas anyway. Of course, all travel, restaurants, sporting events, hotels, casinos, the list goes on and on. And it’s going to last it looks like maybe a minimum of eight to 10 weeks, and then we might start to see it loosening up, but nobody knows that with certainty. What’s really concerning, of course, is this time the unemployment rate is likely to be even higher than it went in 08 even though I think the economic impact will actually be less. The reason is so much of our employment and numbers are lower wage individuals in service businesses like restaurants, etc., small businesses, people who cut hair, and those kinds of things. And what you’re likely to see then is the small businesses having to lay everybody off.

Larry Swedroe:
And so the unemployment rate very quickly could spike, and we could see millions of people unemployed, hopefully for a relatively short time. So the numbers are likely to be bad. GDP is almost certainly going to be a recession second, maybe even third quarter. But you have to remember, even if economy is weak in the third quarter, if it’s coming back, then you’ll see some growth. So still would expect weak, but maybe better growth in the third quarter. Most important for investors to understand is this. You do not want to mistake information with knowledge you can use in the investment world. That means is if you and I know what I just told you, and obviously everyone is well aware of it, that information is already embedded in current stock price. That’s why the market is now down 35% or something like that. And now the market could go down maybe only if the news is much worse than what we already are anticipating.

Tim Maurer:
So the market’s already anticipating bad news?

Larry Swedroe:
Yeah, it doesn’t matter going forward if the news is bad or not. It’s only whether it’s better or worse than we currently expect. I’ll give one brief example. I remember coming out of 08, companies were reporting earnings down 20%, and the stock would rise 10 or 15% overnight. And the reason was the market expected earnings to be down 30%. And that’s the kind of thing that can happen once we get past the worst of it. We just don’t know how long. The market, my guess is, is saying this is a three to four to five month period, somewhere in there. So if it’s faster, and we start to come out of it quicker, people start returning to work and travel in six or eight weeks, then the market likely will recover and fairly quickly. If it takes six or nine or 12 months, markets could go down and may be quite a bit more.

Tim Maurer:
Wow. It’s scary to think about that, but especially scary when you humanize these unemployment numbers. And we started talking about this at the dinner table last night, thinking about the friends we have who work in the restaurant industry, the folks we know who run the gym that we go to and so forth. I’m curious, do you have any insight or application to how we might, those of us who are a little bit better preserved from this particular economic downturn, how we might serve those around us?

Larry Swedroe:
Yeah, Tim, that’s a great point. I have friends. We’re talking about buying a gift certificate to a restaurant. Go on Groupon and buy an advance dinner in one of your favorite restaurants so the restaurant gets that cash today. We can all do little things, acts of kindness. And we all know that there’s some chance that restaurant might go out of business, but I’m willing to do that and support the local restaurant. If it’s staying open, order a take-out dinner from them, and they’ll deliver it. Those are the kinds of things we need to see, not what this person … I think it was in North Carolina who bought up 17,000 bottles of sanitizer and trying to rip people off. That’s not what America is all about. We’re about helping others, and we can do those small acts of kindness and support our local businesses.

Tim Maurer:
And those small impacts will have a a big impact indeed. Well thank you Larry, and thanks to you for turning into this episode of Ask Buckingham. If you have a question that you’d like to see us address, you can do so by navigating to the website, askbuckingham.com, or you can email your question to question@askbuckingham.com, or you can just click in the upper right hand corner on this video and it will take you to the page. Remember that there are no dumb questions, but unfortunately there are plenty of poor answers out there. Our hope is that in giving you straight answers to your questions, you’ll be able to acquire that knowledge in pursuit of good decision making. So please follow us, and by all means, ask Buckingham.

Ask us a question for a video.

Our hope is that in giving you straight answers to some questions weighing on your mind, you’ll be able to apply that knowledge in pursuit of good decision-making. If there is a topic you’d like us to address in a future video, share your idea with us!

Featured Guests

cheri dorsey
Cheri Dorsey
Co-Founder & Owner of Sessa & Dorsey, LLC

Cheri is the co-founder and owner of Sessa & Dorsey, LLC, an estates and trusts boutique law firm practice.

Mike Kenneally
Vice President & Co-Founder at ECD Lacrosse

Mike Kenneally is vice-president and co-founder of East Coast Dyes Lacrosse, a small lacrosse equipment manufacturing company in Maryland.

michael_oneal
Michael O'Neal
Executive Director at OneWorld Health

Michael is the executive director of the global nonprofit One World Health, which partners with communities in developing countries to bring permanent, sustainable healthcare to the chronically underserved.

Moira Somers
Dr. Moira Somers, Ph.D, C.Psych
Neuropsychologist, Professor and Executive Coach

A neuropsychologist, Moira specializes in the growing new field of financial psychology.

Meir Statman
Meir Statman, PhD
Research Advisor

Meir Statman is the Glenn Klimek Professor of Finance at the Leavey School of Business, Santa Clara University. His research focuses on how investors and money managers make financial decisions and how these decisions are reflected in financial markets.

Featured Associates

Tom Bodin
Tom Bodin
Practice Integration Officer

As a Practice Integration Officer at Buckingham, Tom Bodin provides fractional CFO services to align wealth creation strategies for owners of legal, dental, and medical offices including tax, pension and retirement planning.

Aaron Grey
Aaron Grey
Director of Planning Integration

As the director of planning integration at Buckingham, Aaron helps advisors develop, implement, monitor and update wealth management strategies in pursuit of their clients’ financial goals.

Kevin Grogan
Kevin Grogan
Managing Director, Investment Strategy

Guided by academic research, Kevin Grogan, Director of Investment Strategy, oversees our overall strategy and helps clients and advisors alike distill complex investing topics. 

Jared Hoffman
Jared Hoffman
Managing Director, Relationship Management

As Managing Director at Buckingham, Jared provides education on best practices around cybersecurity. He is a member of Infraguard, a partnership between the FBI and public sector created to share information on cybercrime.

blerina_hysi
Blerina Hysi
Fixed Income Trading Manager

As fixed income trading manager, Blerina helps construct and maintain customized bond portfolios, all with an eye toward finding the best way to implement the client’s comprehensive financial plan.

Jared Kizer, CFA
Chief Investment Officer

As Chief Investment Officer and chair of the firm’s Investment Policy Committee, Jared evaluates findings from academic research and applies that learning to architect the firm’s investment strategy.

Jeffrey Levine
Jeffrey Levine
Director of Advanced Planning

As Director of Advanced Planning, Jeffrey serves as a technical resource for advisors and the firm’s primary thought leader regarding evidence-based planning concepts and strategies.

Irv Rothenberg
Irv Rothenberg
Wealth Advisor (Retired)

A Buckingham wealth advisor (retired) with more than 40 years’ experience, Irv’s passion is helping advisors and their clients create meaningful conversations around important end of life issues.

Jonathan Scheid
Jonathan Scheid, CFA, AIF
Managing Director, Solutions

With over 20 years of experience working with advisors and their clients, Jonathan enjoys sharing interesting perspectives on a wide range of investment and economic topics.

Brant Steck, CFP®
Brant Steck, CFP®
Risk Management Consultant, First Element Insurance Partners

Brant is a Risk Management Consultant at First Element Insurance Partners.

Susan Strasbaugh
Susan Strasbaugh
Wealth Advisor

As part of a firm of fiduciary, fee-only wealth advisors, Susan takes a total-care approach to identifying, organizing, planning, implementing and coordinating clients’ most important financial goals.

Larry Swedroe
Larry Swedroe
Chief Research Officer

As Chief Research Officer, Larry Swedroe has authored or co-authored 16 financial books and devotes all of his time to research and education in the areas of investing, financial planning and behavioral finance.