A New Allocation for a New Economy

The spread of COVID-19 in the United States has changed the economic and social landscape in ways few could have predicted.

There have been over 30 million layoffs, unemployment has skyrocketed, and the GDP could be down more than 20% in the second quarter of 2020.

“Social Distancing” has created a new quarantine economy: with many companies falling by the wayside while others have thrived.

Forbes.com keeps a Coronavirus Bankruptcy Tracker on its website updating the latest bankruptcy filings by major public companies in the U.S. The list is long and stretches across a variety of sectors and markets.

Travel, retail, transportation, entertainment, and hospitality have been hit particularly hard. The big names have included: Neiman Marcus, J.Crew, J.C. Penney, CMX Cinemas, Advantage Rent-A-Car, and 24-Hour Fitness.

On the flip side, there have been companies and industries that have thrived in this new economy – most involving remote work and mobile and in-home entertainment. Activision Blizzard, Electronic Arts, Nintendo, Slack, and Zoom all fit the mold.

On the housing front, with many people suddenly out of work, many are downsizing to more affordable to mid-range housing where supply was already constrained.

The U.S. has never seen anything like Covid-19 as it has transformed our daily social and economic lives. But if history has taught us anything, it’s that Americans have an amazing capacity to evolve.

Those who were cruising along and satisfied with the status quo suddenly find themselves in unfamiliar territory. Suddenly jobless, many are wondering where their next paycheck will come from.

Those who were heavily allocated towards Wall Street and suddenly saw their portfolios shrink overnight are now faced with some tough questions.

Do they retreat and live to fight another day or do they embrace the new economy and pivot?

Many in the old economy are wishing they had done things differently – never wanting to feel helpless again, wondering where the next paycheck is coming from.

THE NEW ECONOMY DEMANDS A NEW ALLOCATION

The two overriding concerns that have risen to the surface for many in the wake of Covid-19 are:

  • How to preserve income.
  • How to avoid Wall Street volatility.

Where to allocate for a new economy?

Look to those who were already prepared for this economy. The truth is, they’re ready for any economy. There was a class of ultra-rich and institutional investors who were prepared for the current economic turmoil who were unconcerned about maintaining income or preserving capital.

These investors didn’t rely on their jobs for income and didn’t see their capital shrink on Wall Street. That’s because these investors are heavily invested in alternative assets – investments that produce consistent cash flow backed by tangible assets.

They were prepared for the new economy because they were prepared for any economy.

Why cash flowing real assets? It’s because they offer the type of diversification public equities can’t offer to insulate income and assets.

That’s because alternative investments allow you to diversify across:

  • Asset Class
  • Stage of Development
  • Investment Vehicle
  • Type of Return
  • Holding Period
  • Geographic Location

A portfolio spanning a variety of geographic locations and asset classes are equipped to withstand any economic assault on your portfolio.

A new allocation in a new economy will give investors smarting from the recent recession the opportunity to avoid disasters in the future.

For future allocations, look not only beyond Wall Street but look beyond borders and asset classes to not only preserve income and capital but to thrive in the new economic landscape.

About the author

Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.

Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.