Post-Covid Economy Examined In Chesco

EXTON, PA —More than 150 business executives and investors got expert reports on the national and global impacts of an unprecedented post-COVID economy at the Chester County Economic Development Council’s 19th Annual Economic Outlook.

Patti Brennan, a certified financial planner, described 2022 as the year of surprise, noting Russia’s invasion of Ukraine and supply chain issues continuing longer than anticipated.

“As a result, inflation spiraled up quickly and the Federal Reserve had to be as aggressive in fighting inflation as it was in fighting the impact of COVID during the global shutdown,” said Brennen at the luncheon at Penn State Great Valley.

Inflation

Brennan, who was named by Baron’s as a Hall of Fame Advisor, noted that 40 percent of inflation measurements are housing related.
Since there is a 12- to 18-month lag in this data being included in the Consumer Price Index, the country is dealing with the underlying inflation of 2020 and 2021 instead of what the data reflected then.

Brennan said that supply chain issues are not back to pre-pandemic levels, but they are getting better, and an aggressive federal policy is having its impact as well.

She anticipates inflation will continue to come down in 2023.

“The final surprise of 2022 was how the bond market responded to rising rates,” Brennan said. “Since the Great Depression, we’ve only had three years where the bond market has been negative. Until last year, there has never been a year where the bond market was down double digits, yet we saw a loss of 13% in a bond index.”

Dianne P. Manges, a certified financial analyst, said the recession risks for the next 12 months have risen sharply, in the U.S., but a recession is not necessarily ‘baked in.’

Manges, director/senior investment advisor for Truist Foundations & Endowments Specialty Practice, said that the country has the tightest global monetary policy in 40 years, from the federal government to minor and major central banks tightening to fight inflation after a massive stimulus.
“Consumer spending is expected to be quite strong in 2023 and the labor market is tight,” she said. “The American consumer has the potential to keep us above water.”

While concerns about Ukraine and China are top of mind for many investors concerned about recessionary pressures and sluggish growth, Manges pointed out that the U.S. and Europe makeup half of the global economy and will be the driving force for gauging the health of the economy and policies in 2023.

She said she is cautiously optimistic about China’s President Xi Jinping beginning a third term and delivering GDP growth of over 5%.

“He’s aggressive and competitive,” Manges said. “If he can get China back on firm footing, I would not be surprised to see some growth measures coming out of China. China could go, either way, dependent upon President Xi stepping on the gas.”

In Chester County

Brennan expects higher borrowing costs to continue and unemployment to pick up, so she advises people to keep their emergency funds flush.

“Retirees have had to tolerate more of their money in stocks because bonds were paying minimal interest,” she said. Now we have more options.”

She also notes that empty nesters who are behind on their retirement planning can now put $22,500 into their 401(k) plus another $7,500 each year. “A couple of empty nesters who might feel a bit behind can put $60,000 into a 401(k) to catch up, and they should,” said Brennan.

For more information, visit www.ccedcpa.com.