When the economy changes, look for the winners

| July 14, 2023

One of the most satisfying aspects of investing is benefiting from opportunities when the economy transforms. During the pandemic, for example, a lot of businesses adopted remote work as an option. In recent months we’ve started to see some pushback from employers, with some CEOs mandating a return to office. JPMorgan, Amazon, Disney, and other large companies have been enacting new policies to bring corporate employees back three to five days a week.

You can effectively argue for and against remote work. Some studies indicate a decrease in productivity, and others say working from home can hamper corporate culture, mentorship, and collaboration. But I’ve talked with executives who say they’ve seen no drop in productivity and say remote work has allowed them to greatly expand their search for employees.

I suspect hybrid arrangements are here to stay. The truth is, the slow shift toward a hybrid model began years ago. People realize that if you’re going to be staring at a computer screen and typing all day, where you do it might not be important.

What’s interesting from a long-term standpoint is how a hybrid approach affects the economy. We don’t have all the answers yet: I’ve read that work-from-home has been both a major driver in inflation, as remote employees seek bigger housing options, and a curb on inflation because employers can better control wage growth — they can hire from regions with lower wages and can offer flexibility and a better work-life balance instead of higher salaries.

In large metropolitan areas, less commuter traffic hurts businesses and tax revenues. On the other hand, delivery businesses, warehouses, and services that allow you to replace being in-person, such as cloud agreement platforms with electronic signatures, have boomed.

Where some parts of the economy might suffer, others will benefit. That’s one of the great things about a free enterprise system—the ability for an economy to respond quickly and transform.

So be nimble and ready to take advantage of change. The next transformation might be from artificial intelligence. Headlines focus on the number of jobs that in jeopardy because of AI. And some industries are trying to hold off AI’s progress. But it’s really difficult to do that over the long term in a competitive marketplace.

AI might destroy some types of businesses, but I’ll guarantee you that it will create other industries. And many current industries will benefit from AI, allowing for lower costs, greater productivity, and wider profit margins.

Since I’m in financial planning, I have to consider the impact of AI. Not what it might do to my business, but for it. Are there ways to use it to reduce costs for clients? To add a couple of percentage points to their investment returns? To provide better service?

When faced with major economic changes, I find a healthier approach is embracing them and thinking about the benefits—both for your business and for your portfolio.

Sources:

https://www.businessinsider.com/companies-making-workers-employees-return-to-office-rto-wfh-hybrid-2023-1

https://www.marketplace.org/2022/09/27/fed-finds-working-from-home-has-been-big-inflation-driver/

https://libertystreeteconomics.newyorkfed.org/2023/06/is-work-from-home-working/

https://www.stlouisfed.org/publications/regional-economist/third-quarter-2019/working-home-more-americans-telecommuting

https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-employment.htm

https://www.forbes.com/sites/adigaskell/2023/01/19/what-impact-does-remote-work-have-on-inflation/?sh=6a68ed0d65f3

https://www.americancityandcounty.com/2023/02/16/cities-losing-out-on-the-remote-work-trend/

https://www.advisorperspectives.com/articles/2023/07/05/diversity-office-job-martin

https://www.frbsf.org/economic-research/publications/economic-letter/2022/september/remote-work-and-housing-demand/#:~:text=According%20to%20our%20data%2C%20remote,overall%20increase%20in%20house%20prices.

https://finance.yahoo.com/news/3-home-stocks-buy-remote-101008383.html



Evan R. Guido is the Founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or eguido@aksalawealth.com.   Read more of his insights at https://finance.heraldtribune.com/category/ask-guido/. Securities offered through Avantax Investment ServicesSM, Member FINRA, SIPC.  Investment advisory services offered through Avantax Advisory ServicesSM, Insurance services offered through  an Avantax affiliated insurance agency.  6260 Lake Osprey Dr. Lakewood Ranch, FL 34240.  The views and opinions presented in this article are those of Evan R. Guido and not of Avantax Wealth Management® or its subsidiaries.  Past performance does not guarantee future results. The S&P 500 is an index of 500 major, large-cap U.S. corporations. Standard & Poor's is a corporation that rates stocks and corporate and municipal bonds according to risk profiles. The S&P 500 is an index of 500 major, large-cap U.S. corporations. You cannot invest directly in an index.  An investment in a money market fund is not insured or guaranteed by the FDIC or any other government agency.  Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.  CDs are FDIC insured and offer a fixed rate of return.  They do not necessarily protect against a rising cost of living.  The FDIC insurance on CDs applies in case of insolvency of the bank, but does not protect market value.  Other investments are not insured and their principal and yield may fluctuate with market conditions. Investments are subject to market risks including the potential loss of principal invested.