In the back of our minds we know that by time many things do change. But who would have ever guessed what was in store for us this year? The start of this third decade of this century surely got off to a nasty start – no matter from which walk of life you hail from.
In trying to understand the long road ahead from the mess we find ourselves in, I found myself asking how does this impacts our psyche’s? The questions I am going to ask are those we are all going to ask. What is the long road ahead?
“No one saw this coming”
Like a broken record, crisis after crisis when those at the helm of society are posed this question, at a stage of uncertainty, to which we hear this exact same response. We heard it in the Dot-Com bubble of 2001, we heard it in the credit crisis of 2008 and over and over again. You may say, look you mentioned economic crises – this one is a health crisis, it is different. To which I politely remind you the names of pandemics in the last two decades, which include the H1N1, SARS, MERS, Zika, and Ebola to name a few.
If one looks a bit further in the past we find a host of devastating accounts of diseases, some of which live on in less developed countries. The truth is not that no one has warned about this possibility, but rather that to our peril, as happens in many instances, we choose to ignore and in some cases marginalize those voices.
So what is different this time?
What is different this time is simply that we are no longer by-standers with the freedom of still going on minding our own business. The traction of the current pandemic has moved across the major travel routes, marking the interconnectedness of our world, if that was not already evident.
Despite all the benefits that being interconnected have brought to us, we must realize that we are no longer in a vacuum. Given the nature of this pandemic, we find ourselves unable to protect ourselves in a manner that allows us to go on with our daily lives, which has brought us to a standstill, with practically everything being shut off.
What is the way out?
By now many are asking this question figuratively and literally. Despite that we are still in the midst of the fray in what will be a struggle to contain this epidemic, the East shows us what to expect. In countries such as China the epicenter, and South Korea, the pandemic has run its course, with its exponential increase to a more normalized state after the drastic measures taken. At the time of writing, life has started to return, slowly and cautiously back to normal in the said countries.
Depending on the effectiveness of our governments and health systems we can expect, give or take a similar course to play out. The real way out however, is the two-way race, towards coming up with a form of cure and eventual vaccination which will allow us to put this turmoil behind us.
What is the cost?
There is no beating around the bush that this disruption has and will cost us dearly. First and foremost, the highest cost is the toll of lives taken away by this pandemic. Economically, the biggest potential costs are the potential losses of enterprises large and especially small. It is hard to quantify to what extent or depth; this will bring along. Both locally and internationally, governments are taking on unprecedented measures, to preserve the economy.
Positively, apart from further easing monetary conditions, we are promised to see fiscal stimulus which has been long in the coming. In the medium term there will be job losses, bad debts and closures which are inevitable.
With hindsight at some point in the future, this could be seen as a positive reallocation of resources, from weak and underperforming sectors of the economy towards more efficient and relevant areas.
What will be the new normal?
Time and time again, it is through instances of extreme hardship, the spur real change. The economy will eventually restart and a new normal will be restored. This will present us with new challenges, and opportunities, for allocating capital towards, more efficient and relevant industries. Adjustments, will be required for the long road, ahead and investment portfolios will stand to benefit from being re-balanced to reflect these changes. I conclude by the words of Steve Jobs, which I feel are relevant to us all today: “It was an awful tasting medicine, but I guess the patient needed it.”
Daniel Gauci is a financial advisor at Calamatta Cuschieri. For more information visit www.cc.com.mt. The information, views and opinions provided in this article are solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.