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Pandemics, Supply Chains, Recessions, Multifamily and Market Selections

Pandemics, Supply Chains, Recessions, Multifamily and Market Selections

Unless you have been on a spiritual retreat in the desert for the last few months disconnected from any sort of technology and outside human connection you have heard about and likely already felt the impact of the novel coronavirus COVID-19. This epidemic which originated in China has rapidly spread to all corners of the earth causing the World Health Organization to declare COVID-19 a global pandemic.

As of the writing of this article the COVID-19 health crisis has left more than 3 million infected and hundreds of thousands of people dead with the numbers continuing to rise each day. To control the spread of this virus many countries have issued stay at home orders effectively bringing businesses to a grinding and unforeseen halt. The whiplash from this sudden stop in the economy has created another crisis – an economic crisis. In the US, records were broken on a daily and weekly basis for stock market crashes, unemployment claims, federal funding bills and more.

The Coronavirus, Black Swans and Real Estate

The Coronavirus is a black swan event – a term in the world of economics and finance that refers to an event that is rare and unpredictable (like seeing a black swan) which is of such a magnitude that it impacts everything in life as we know it. As an investor, whether in the stock market or in alternative investments, the question on everyone’s mind was “will this be worse than the great recession of 2008?” - an experience still fresh in everyone’s memory. While the definition of a recession is two (2) quarters of sustained economic contraction most pundits have already sounded the alarm that the US is in a recession.

While we could go into why the 2008 Great Recession and the 2020 COVID-19 induced state we find ourselves are different, I think a more valuable lesson on market contagion is presenting itself. As we watch the news each day it is like someone has pressed the fast-forward button to 20x speed on our economy and we can more clearly see the spotlight on how recessions spread. As investors our goal is to appropriately mitigate our risks to get the reward of return on our investments. Understanding the way recessions spread through an economy gives us insight in how we should invest to protect ourselves, preserve capital and ultimately grow our investments during this pandemic and similar future events.