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Guarding against unemployment with passive income

Save for a rainy day to stay sheltered in a mighty storm while unemployment spikes and economies slide

The rise in unemployment globally poses not just challenges to various countries but also to us and our loved ones. However, governments and central banks are rising up to challenges to cushion the fall in economic activity. To guard against unemployment, generating passive income is crucial, as we seek shelter from a great storm.

Unemployment spikes and economic slides

The closure of businesses globally to reduce coronavirus growth rates is causing a rise in unemployment in many countries. The number of US coronavirus infections climbed above 82,000 on March 26, surpassing the national tallies of China and Italy, as New York, New Orleans, and other hot spots faced a surge in hospitalisations and looming shortages of supplies, staff, and sick beds. A total of 3.28 million filed for unemployment insurance in the week ended March 21, dwarfing previous highs in Labour Department reports published since 1967. This is almost five times the previous weekly record of 695,000 during the 1982 recession.

Two weeks earlier, before closures of businesses swept across vast swaths of the country, the number stood at 211,000, close to a half-century low. Bloomberg’s Economists Eliza Winger, Carl Riccadonna, and Yelena Shulyatyeva said that the deterioration in claims to date already implies an unemployment rate approaching 5.5% in April, and there is no reason to believe this is the peak. The volume of applications overwhelming state administrative offices suggests additional million-plus weeks for initial claims may lay ahead. Federal Reserve Bank of St. Louis president James Bullard predicted the US unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product.

 

In Singapore, policymakers have downgraded the official growth forecast for 2020 to between -4 per cent and -1 per cent, a worse outlook from an earlier predicted range of -0.5 per cent to 1.5 per cent. The construction sector took the largest hit in the first quarter, shrinking 4.3 per cent year-on-year, according to estimates by Singapore’s Ministry of Trade and Industry. The services producing industries shrank by 3.1 per cent in the same period.

In an interview with the media on March 27, after the Resilience Budget was announced, Singapore Prime Minister Lee Hsien Loong stated that there will be uncertainty, pain, job losses, cases of the COVID-19, and as time passes, there will be further people who will not survive and will succumb to the disease. There will be ups and downs. “Therefore, it is critical that we go into this eyes open, strong leadership, good government, united, and determined to see this through”.

Staying sheltered in a mighty storm

In response to these unprecedented challenges, governments and central banks from all over the world have announced stimulus packages to protect jobs and economies. For example, the European Central Bank launched a new temporary asset purchase programme of private and public sector securities with an amount of €750 billion. The Federal Reserve announced on Monday that it will launch a barrage of programmes aimed at helping markets function more efficiently amid the coronavirus crisis. Among its initiatives is a commitment to continue its asset purchasing programme “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy”. Just a few hours ago, the US Senate approved a massive US$2tril stimulus deal amid growing coronavirus fears. Malaysia unveiled a RM250bil economic stimulus package just hours ago. Singapore has just delivered a second stimulus package of S$48bil on March 26.

As Singapore Prime Minister Lee Hsien Loong stated aptly, “We have tapped from the reserves for this package – S$17 billion. The total amount of reserves, that we do not publish but we have much more than that and it will see us through for quite a long time. It is just as well that we have not gone and listen to the people who said to us – you do not need so much, why are you saving all this money, just touch it and we will be all right. But, we kept it aside. I think this is not just a rainy day, it is a mighty storm as DPM said and we will do what we need to do.”

Saving for a rainy day

The most common sense of the term financial independence is about having enough wealth to live as we wish for the rest of our lives without having to work. It is also about having the ability to deal with life’s ups and downs without sacrificing our quality of life or going into debt. We aspire to manage our wealth so that we have enough wealth for our retirement, and taking care of our loved ones. However, it is equally important to save, invest, and generate passive income, so that we can protect ourselves and our loved ones. At TLC, our percentage allocation management module (Pamm) funds have been achieving the following results in March:  Pamm 1 (8.1%) and Pamm 2 (8.8%). Given the challenges posed in the global financial markets, generating passive income and preserving capital is considered impressive during these times.

Various developments that will happen in quick succession are likely to contribute to volatility in major financial markets. This is the time when there are plentiful investment opportunities for investors to invest and grow their wealth. At TLC, we track developments in global financial markets to ensure we can achieve good financial returns on our clients’ investments. We are committed to creating opportunities for you to obtain great profits. Do you have the courage to embrace the opportunities ahead of us? Now is the best time to invest for a brighter future! Prepare for better times, by letting us, TLC, to become your partner that can guide your financial decisions in years to come.

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