If you’re trying to manage your family’s wealth, the last year has likely left you with a lot of questions.
You watched the coronavirus pandemic usher in the worst recession in decades. And now you’re wondering, has the economy recovered? Is the stock market going to crash? Is it safe to invest again?
To take care of your family, you need to know where the economy is headed.
And while you should be wary of any advisor that claims to have a crystal ball, there are three things that should you leave you feeling optimistic about this year:
- The COVID-19 response
- Historically low interest rates
- Federal stimulus policy
Read on to see how these three factors impact family wealth management in 2021.
1. The COVID-19 Response
Most people know all too well how the coronavirus pandemic has affected the economy.
Businesses were forced to shut down across the nation. With entire industries stalled, many people found themselves out of work. Many more had to adapt to working at home. In a matter of months, unemployment approached levels the United States hasn’t seen since the Great Depression.
Meanwhile, the stock market dropped dramatically. March 2020 saw the three worst single-day point losses in history.
But what now?
Businesses are opening back up. Employment is beginning to rise. And the stock market is up nearly 80% to hit record highs.
The rebound is due largely to the COVID-19 response. As infection rates fall, the economy is poised to rise.
People concerned with family wealth management have reason for continued hope. Vaccines are now available to all adults. As of the end of April, one-third of the United States population over the age of 18 is fully vaccinated.
That’s good news for you because it means more and more of the economy will be ready to open up and grow.
2. Historically Low Interest Rates
To support the economic recovery, the Federal Reserve has committed to historically low interest rates.
Low interest rates stimulate the economy by making it cheaper to borrow money.
Because lenders are charging less interest, more people are able to make big purchases — such as a house or car.
More purchases mean more production. An increase in production creates more jobs and puts more money in the economy.
Business owners will feel this ripple effect. Plus, they’ll be able to borrow more money to invest in their companies.
If a new home or car is part of your wealth management plan, low interest rates are good news. But even if you’re not considering any major purchases, investors can expect relevant stocks to see a boost.
3. Federal Stimulus Policy
Though it was borne out of need, federal stimulus policy is exciting for family wealth management.
That is because the stimulus is pumping a staggering amount of money into the economy.
Recently the federal government passed a $1.9 trillion stimulus package. This American Rescue Plan is among the largest stimulus packages in history. For comparison, after the 2008 economic crisis, the Obama administration passed a $900 billion stimulus.
Many Americans are familiar with stimulus checks they have received. But the package also extended unemployment benefits, offered tax breaks and provided aid for state and local governments. Other provisions include housing assistance and school support.
Though some are concerned about the increasing deficit, the economy greatly benefits in the short term.
As stimulus money works its way into the economy, there will be a lot of people looking for good opportunities to spend it. And since interest rates are low, there are few obstacles to hinder buying and selling.
Investors can take advantage of increased spending. And those looking towards the future can plan for a financial market loaded with potential.
How You Can Take Advantage of the Economy for Your Family Wealth Management
While there are other factors one can consider, the COVID-19 response, low interest rates and federal stimulus policy will continue to determine the economy’s direction throughout 2021 and beyond.
The important thing then is that your family’s wealth management strategy makes the most of it.
Whether you’re preparing for an upcoming retirement or want to make investments that will pay off in the long run, you want a financial plan that understands — and takes advantage of — this year’s economy.
Talk to your financial advisor to make sure you have a strategy in place today that will take care of you tomorrow.