The Azucena Take: Overstimulating the Economy (to the Moon)

As life returns to normal, we are noticing some of the impacts of the third stimulus (both the positives and negatives). We have put a lot of attention on the positive impact it has had while overlooking the unintended consequences. Thankfully, it’s a good problem to have as it’s an indicator that the economy is recovering.

The first has been inflation which is the result of a surge in cash entering the market and supply failing to meet demand. When the pandemic hit, everything came to a halt and people were forced to shelter. This resulted in a hit to supply chains while savings started to rise. Life is starting to return to normal thanks to the economic support of the third stimulus and the rise of a vaccinated population. While demand is high, supply has been unable to keep up as the manufacturing industry is just starting to get production back up to speed.

It should be noted that such inflation was anticipated as it always happens following such a crisis. Thankfully, it’s expected that this will be a short-term problem as manufacturing should be able to meet consumer demand in a few months.

The second has been the service industry is having trouble trying to fully staff up. As of April 2021, there are 9.8 million unemployed but there are 8.1 million job openings. There are a lot of factors at play and many competing theories as to the cause. Overall it shows that the number of new jobs gained should hit pre-pandemic levels by mid-2022 the latest.

While waiting till 2022 may seem like a long wait, it means we will not witness the same hardships as the 2008 Recession. Financial and government institutions are doing everything to speed up the recovery by overstimulating the economy. While the third stimulus has created some problems, they are minor compared to having to wait 5 or more years for the economy to recover.

This will also mean that there are many lucrative opportunities for investors of commercial real estate. Real estate has been one of the best investments to hedge against inflation while the hit on supply has also resulted in fewer houses being built (creating a seller's market and a huge demand for apartments). Retail being understaffed means they are being successful and will have increase wages to attract talent (who would also go on to spend more in the economy).

Those who prepared for this boom are already reaping the rewards of their investment. Thankfully, it’s not too late to start investing in the recovery. Last year was defined by stories of doom and gloom while 2021 has been a year of so much hope that even the problems are fully embraced.