How Has the World Changed Since the Coronavirus Began?
Who could’ve imagined a year ago the world would be what it is today? Even with the incoming quarantine and social distancing practices, “March 2020 You” would have absolutely no clue that “March 2021 You” would still be sporting a mask while catering to leads and clients under unusual circumstances.
For better or worse, the world has changed, and while normalcy will eventually continue, the definition of normalcy will never be the same. Everyone has had to pivot and adapt to these conditions - whether that has been embracing new technology or reevaluating business operations, rolling with the punches has become the mantra of 2020. Here is how the world changed a year into the pandemic.
State of the World: 2021
The COVID-19 pandemic accelerated our embracement of technology tools like Zoom calls and virtual property tours. Surprisingly, this technology isn’t new. Before 2020, companies and workers didn’t see the advantages of technology tools like this, and why should they? Meeting in person usually leads to more creativity and better productivity. As an agent, meeting face-to-face can lead to more sales. But when you consider the convenience and quality of life factor that these technologies enable, it will be hard to revert back once COVID-19 becomes less of a public health issue. Roughly a third of workers do not want to venture back into the office.
Unemployment hit record numbers in March 2020. Shutting down the world led many companies on a harrowing path where they had to make a decision on their business. Many chose a skeleton crew approach. As a result, the U.S. saw the largest and quickest rise in unemployment since tracking began in January 1948 (though The Great Depression most likely saw higher numbers per capita).
As we gathered more information on the disease, the economy was able to open back up slowly but surely. The unemployment rate dropped from 14.7% back down to 6.3%. As vaccines become more available and the service industry regains steam, this figure should continue to decrease but in smaller increments.
Unlike the economy, the stock market flourished during the pandemic. At first, there was a significant dip due to investor confidence diminishing. However, amongst the original stimulus package, the Fed maintaining a near-zero rate, and the rise of the retail investors thanks to platforms like Robinhood, the markets have fared very well.
The two biggest stories from the markets dealt with the reemergence of Bitcoin and the meme stock controversy from the short squeezing of Gamestop’s stock. Cryptocurrency is finally being embraced by the mainstream public as an intelligent investment for countering inflation. Many experts are predicting it will replace gold at some point in the future. For investors worried about a stock market bubble, currency like Bitcoin and stocks attached to their success - Coinbase is poised to have the biggest IPO in the history of the markets - may be a viable option.
If you’re unfamiliar with the “meme stock” phenomenon that sparked a nationwide outcry by both retail investors and hedge funds, here is a quick breakdown of what exactly happened:
Essentially, Redditors saw their favorite childhood company was being heavily shorted by hedge funds like Melvin Capital and wanted to short squeeze in retaliation. For reference, Gamestop stock’s float - the amount of stock available to trade - was 41 million shares, but there were almost double the number of short positions at the exact time.
You may wonder how you can have more short positions than actual positions within the individual stock’s market. This occurs when a large number of naked puts - short options written on margin - are created, which meant that when the contracts were written, they were done without a stock actually backing the short position. Usually, hedge funds do not need to disclose their short positions, but Melvin decided to hedge their position by writing their own naked puts. The retail investors on Reddit saw the situation and acted quickly by buying up as much stock as possible and holding onto the shares until Melvin’s Capital short position expired. Once mainstream media and consumers caught wind of this, they too jumped onto the bandwagon and made the situation for Melvin Capital infinitely worse.
If this all sounds confusing, you’re not alone. Simply put, Melvin Capital felt Gamestop was a bad investment, so they borrowed shares from a brokerage and immediately sold them on the market. Their prediction was that the stock would drop, and they would purchase the shares at a discounted price and then return the shares to the brokerage. If this happened, they would have locked in a profit.
However, retail investors saw this opportunity and combated the short sell by buying up Gamestop shares and artificially pumping the stock’s price. At some point, Melvin Capital needed to buy back and return the shares to the brokerage, but because there were so few shares at such a high price, they had to take on a loss. The loss was so big that the hedge fund ended up going bankrupt. And tada, that’s how you effectively implement a short squeeze.
You may be wondering how this is all legal. Unfortunately, it is all above board. If this was 1915 and 15,000 New Yorkers met up at the Polo Grounds where they all agreed to invest in Ford shares, that too would’ve been legal. Hedge funds have also enacted the same shady practices for over a hundred years. It will take action from Congress and the SEC to limit legal “pump and dump” schemes like this as well as change regulations surrounding limiting naked puts and predatory practices behind short trades.
Led by the NBA, all four major sports leagues shut down immediately once athletes began testing positive. Each league had their own ideas on how to continue their 2020 schedules. The NBA initiated a bubble environment where all the players were “jailed” within Disney resorts in Orlando. Other leagues continued domestic travel but eliminated fans in the stands for the duration of the season. All Commissioners allowed athletes to “opt-out” if they felt unsafe playing during the pandemic.
While there were some hiccups with games being canceled due to positive coronavirus tests, every league was able to finish and declare a 2020 champion. Now a year later, professional sports are beginning to open their doors to fans in a limited capacity. The fact that these leagues have continued to provide needed entertainment during a pandemic is a great testament to what sports mean to us as a country.
Real Estate Market
After a slowdown during the spring, the residential real estate market saw amazing growth in home prices. Much of this dealt with low-home-inventory levels and high demand fueled by historically low mortgage rates, homeowners regretfully pulling the trigger on home purchases due to pandemic fears, and a city exodus from major cities like New York and San Francisco.
The average monthly year-over-year gain in home prices was 5.7% compared to 3.8% in 2019. That figure is pretty staggering, especially when considering that March-May saw suboptimal gains. Meanwhile, rent prices were more of a mixed bag, with some medium-sized cities like Phoenix are seeing a rise in rates while major cities like San Francisco are seeing drops. This can all be attributed back to the influence COVID-19 has had on our daily lives as well as an overall drop in quality of life over the past decade.
The commercial real estate sector - specifically retail - has been struggling due to COVID-19 restrictions. Considering the possibility of the CARES Act not being extended could lead to a barrage of companies unable to pay their storefront rent and their landlords (the commercial real estate firms) defaulting on their loans from the banks. Firms situated in e-commerce are the only ones thriving at the moment. While the long-term repercussions of the coronavirus are still unknown, some things will have to give if this industry is to endure into the future.
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