COVID & Financial Markets

Covid-19 & the Current State of the Economy

Covid-19 & the Current State of the Economy

By John Hebert, CPM® CFP®

This morning, like most mornings, I got up, made myself a cup of coffee and turned on the business news. The commentator “buzz” was centered entirely on the upcoming Department of Labor jobs report for July. The estimated number was expected to be around 1.5 million new jobs added from June, as nervous analysts scrambled to come up with a narrative to explain anticipated disappointing numbers. Then the host cut off the conversation and turned to the reporter waiting to relay the results; the numbers flashed 1.763 million new jobs!

This pandemic has had an extraordinary impact, but it has unfolded like no other. At no other time in American history has the government sought to shutdown large swaths of the economy. The Spanish Flu of 1918 killed more than 675,000 Americans, and yet only a few towns shut down. Then came the Hong Kong Flu in 1968 which was estimated to have killed over 100,000 people in U.S., with little or no economic shutdown. Hence shutting down the economy was a shot in the dark.

As I write, we are now ending the first week in August and we know quite a bit more. GDP fell 3.4% in the first quarter and fell 9.5% in the second quarter (annualized rates were 5% and 32.9% respectively). All expectations are that the third quarter will show a substantial upside bounce.

The overall unemployment rate peaked in April at 14.7% and has fallen to 10.2% in July, reflecting a third monthly decrease in a row. Forecasts are that the unemployment rate is likely to fall consistently for the remainder of the year, but at a slower pace.

Continued improvement will depend on where and how quickly the economy opens up, as well as success in lowering the virus mortality rates. The overall consensus is that as every month goes by, more parts of the economy will re-open going forward. In total about 22.2 million people became unemployed during the March / April peak, and as of now over 9.3 million are back to work. This represents about a 42% re-employment level, and despite the wave of infections is the southwest, the re-employment effort continued.

Interestingly, the re-employment rates could significantly intensify in August, September and October as federal unemployment benefits expired at the end of July. Currently, the fourth stimulus bill is stalled in Congress. At issue, the federal benefit of $600 per week is thought to discourage many workers from re-entering the labor force since unemployment benefits exceed their employment income. Now those who have jobs waiting for them will likely return, and once that happens, in September and October we’ll get a clear picture of the long-term unemployment problem.

Now that the effects of COVID are clear; school re-openings, unemployment benefit levels, continued low interest rates, a potential executive order for a payroll tax holiday, as well as a vaccine and new treatments, will unquestionably determine the rate of re-employment and economic growth for the next six to twelve months. Oh, and by the way, in case you’d forgotten, there’s an election in less than three months!

What does this mean for the business owner? Our view at Modernize Wealth is that an extension of the Payment Protection Program, if there is one, will be more targeted towards smaller businesses, or focus on the most severely damaged industries. Additionally, the additional federal unemployment benefits, once negotiated, will likely settle in the 70% range, when you add the state and federal supplemental payment, of the individual workers’ prior employment salary to create a strong incentive to return to work.

We may quite possibly see an employer payroll tax holiday by use of Executive Order, though the constitutionality will be fought in the courts. The Fed has pretty much stated that Fed rates will stay at or near 0% until 2024, provided there isn’t an unforeseen uptick in the rate of inflation which is a serious log-term concern.

Finally, no deal will be struck by the Administration and the Senate with the House without liability protection for business against frivolous lawsuits related to COVID. Other parts of a stimulus bill will be geared towards state and local governments, while most of the rest of the House bill are unlikely to survive. Be forewarned; the is no guarantee that a deal will be reached, so plan accordingly.

COVID-19 has impacted all aspects of the global economy over the past several months.
Take the first step in minimizing the long-term financial impact on your personal and/or business finances by
downloading this must-have checklist outlining the steps you can take today to help insulate your own financial plans.

If you’d like more discussion, please feel free to reach out to me by email at, call the office at 480.346.1283. I encourage you to check out our News section; it  has lots of useful resources, videos, and information for business owners.

About the Author

Modernize Wealth specializes in working with business owners to create integrated personal/business financial plans, innovative investment solutions, and planning strategies. John Herbert’s financial industry gravitas comes from almost 30 years’ as a Certified Financial Planner and Certified Portfolio Manager. An accomplished educator, John taught Economics at Chapman University and the University of Phoenix for many years.

Don’t Run Out of Money Before the Recession Ends

Business Owners! Don’t Run Out of Money Before the Recession Ends

Business Owners! Don’t Run Out of Money Before the Recession Ends

One of the enduring features of an unexpected downturn is that it can instantly highlight glaring weaknesses for an otherwise successful business. During good times and expansions, it is easy to ignore unnecessary expenses, bloated payroll, and overly optimistic income assumptions. When the economy experiences an unexpected turn for the worse, expenses can be slashed, payroll trimmed, and income assumptions become more realistic.

Business cycles will be with us always, but some businesses will not be part of any recovery. Who will survive and who will falter?

Five Things to Know to Survive

Here are five things as a business owner you need to know to survive:

1. Develop a strong relationship with a good community bank

One of the surest ways to determine if a business is likely to survive is the level of available capital it has at the onset of a recession. Capitalization levels are undeniably critical and, as any business owner can tell you, when you need it the most, capital and credit are often the least available. Banks may be perfectly willing to extend credit to the marginal borrower, but when margins are squeezed and revenues fall, banks are more likely to reign in credit leaving business owners without a lifeline when they need it most. Lending standards will be raised, lines of credit may be reduced or even cut at the worst possible moment. What then?

If you have a good business relationship with your banker, that person can help you understand and plan to meet their lending standards. You need to know how much you can borrow, what collateral you’ll need to pledge, what the best types of loan might be best under various scenarios, and what your credit score will need to be to qualify. Also, the longer you have been a client of the bank, the more credibility you’ll develop with them.

2. Create a stress test for your business plan

As we at Modernize Wealth have stressed, a business plan is a must if you are to navigate through the choppy waters of a recession. A business plan would allow you to create a stress test in order to determine exactly how much of a drop in revenue your business can tolerate before you must reduce costs.

A good plan will also help you determine how much capital you currently have, and how much you might need in the event of a sudden downturn. By knowing this, you can examine your capital sources and create a strategy well in advance of when you need it. You will want to look at bank loans, SBA loans and lines of credit to see what will best fit your circumstances. Knowing what your bank is looking for in its decision-making process and underwriting standards, you can shore up any balance sheet weaknesses before they become fatal.

3. Know how your business will be judged

Do you know how you stack up relative to your competitors? Do you carry too much inventory or accounts receivable? How much liquidity do you have available to meet your obligations? Far too many business owners haven’t a really good idea how to answer these questions, or how to correct any shortcomings. Your business has value in the marketplace, but how is your business going to be valued?

Every business is measured against competitors when determining value. Value is collateral, and as such will be vital in evaluating how much credit you can get. If your financial statements show strength relative to competitors, it can help you at a time where lesser firms struggle.

4. During a recession liquidity is king

Every banking professional or investor knows well the value of a business that best manages their liquidity. Those who make a living evaluating businesses will immediately focus in on the level of certain assets that lose value quickly during a recession, especially accounts receivable, inventory and fixed assets.

Large positions in each of these can seriously damage the business owner’s prospects for obtaining capital. During recessions, payments are delayed, defaults increase, and unsold inventory can pile up as their values plummet. Equipment depreciates and can become obsolete, but during a recession their market value will also suffer a decline. There are strategies to limit the damage to your business, but you’ll need to plan ahead of time.

5. Create a recession fund

Some things never change. A recession can last from six to eighteen months, while expansions can last for ten years. Unfortunately, too many individuals fail to save in the good years, of which there are many more, to get through the lean years.

The same is true for business owners. If a business shows six to nine months of liquid capital available to sustain minimum operations and has access to enough additional credit to survive the remaining period, your chances of success increase exponentially. Assume there will be a recession at some point, often when you least expect it.   

Build your Team

The good news is that you’re not alone. A good team of professionals, including a Wealth Manager, CPA, and a banking professional can help you avoid the pitfalls of being unprepared.

They can help you create and monitor a well-crafted business plan, designed specifically to not only avoid financial distress but take advantage of opportunities created during times of adversity. Having a strong team in place is often why financially well-managed businesses can emerge from a recession stronger and more profitable than ever before. Let us help you become one of them.

If you would like to discuss having Modernize Wealth as part of your team, call us at 480.346.1283 to schedule a discovery session, or use our contact form and we will get a meeting scheduled.

You Need Perspective | Modernize Wealth

Now More Than Ever: You Need Perspective

Now More Than Ever: You Need Perspective

Here we are, at the midpoint of an incredible year to say the least. A year that many will want to forget! We’ve had a pandemic, shut down our economy, a market crash, trade issues, and riots. How are we ever going to survive!?

The short answer is…we’ve been here before. I’m often asked by my family, clients, and business associates how on earth I can crawl out of bed every morning and look at the market? Simple, look to the past to guide the future.

Do you think this is the first health crisis we’ve ever had? Think again. Try the Spanish flu of 1918, the Hong Kong Flu in 1968, and the Aids crisis that started in 1980. You can go further back, but this will suffice for now.

Spanish Flu Pandemic of 1918

The 1918 pandemic infected at least 500 million people, of which it is estimated that 50 million perished. Medicine of the day bore little resemblance to today’s massive technological innovations. An infected patient that contracted that virus in the morning was often dead by nightfall.

Here in the US nearly 675,000 people were listed as having died from the virus. Unlike today few, if anyone, were able to earn a living from home. A much higher percentage of the population lived in poverty, and there were no relief checks in the mail. Businesses shut down without PPP forgivable loans or EIDL (Economic Income Disaster Loans) to help them survive, and the Federal Reserve, only four years in existence, hadn’t a clue what to do.

Additionally, we had the Great War which raged in Europe throughout the pandemic. Many of our soldiers died not from enemy bullets, but from the flu. It was also an off-year election. The Dow Jones industrial Average rose 10.51% in 1918, and 30.45% in 1919.

Too far back you say. Well let’s look at 1968 and see if you recognize anything.

Hong Kong Flu of 1968

Like today, in 1968 there was a terrible flu pandemic called the Hong Kong flu which killed over one million people worldwide. In the US, it is estimated to have killed over 100,000 people with a population size half of that of today, most over the age of 65 years old.

Medicine had advanced significantly in the 50 years since 1918 but was nowhere near where we are today. We also faced an economic crisis in 1968, were at war in Viet Nam, faced assassinations, and civil unrest accompanied by massive riots. The combination of funding for the war and the Great Society program caused a large budget deficit and led to inflation.

The Fed sought to curb inflation by increasing interest rates, and that resulted in rising unemployment. During the entirety of the Viet Nam war, 58,220 US soldiers were lost. About 30% of that number, or 16,592 occurred during 1968 with another 87,388 wounded in action. 1968 is often considered the peak of the Viet Nam War.

Martin Luther King was assassinated on April 4th, Bobby Kennedy on June 6th and for eight days at the end of August 1968, there were violent protests leading to eleven deaths, and over 500 injuries. There were also riots in a dozen cities around the country with looting, more death and destruction. It was also an election year in which Nixon defeated Hubert Humphrey. In 1968 the S&P 500 rose 7.66%, fell 11.36% in 1969, and was flat in 1970. Hardly a disaster.

Reasons to be Cheerful

We have problems today to be certain. But we are hoping a vaccine for COVID-19 will be found before the end of the year, and we have reason to be optimistic because of the substantial advances in technological innovation and research since 1968.

The shutdown has hurt many industries and workers, many of whom will no longer be able to return to their previous job. Bankruptcies will increase and it will take time to recover.  But, as history shows, we will recover as new industries, products, and services will be created because the American people are built to innovate and succeed.

So, when I get asked that question that I referred to earlier of how I crawl out of bed every morning and look at the market, I think of these reasons to be cheerful. After all, we can’t change the past, the future is all we can control as we all work to Make Our Success Our Legacy.

Questions or Concerns? Reach out!

All-in-all, I’d rather be celebrating July 4th in 2020 than 1968 or 1918 thank you very much! Enjoy the Holiday! Please reach out to me at 480-346-1283, or email if you have any questions, or just want to discuss further.

About the Author

John Herbert’s financial industry gravitas comes from almost 30 years’ as a Certified Financial Planner and Certified Portfolio Manager. An accomplished educator, John taught Economics at Chapman University and the University of Phoenix for many years. Sensitive to finding a balance between business, family and finance John has always had a passion for helping people build long-term wealth for their families.


Understanding a Recession

Understanding a Recession

Did you know there are three types of recession? Modernize Wealth Chief Investment Officer John Hebert CPM® CFP® explains the different types of recessions that can occur in an economy, and how they can affect you. John also discusses the current situation caused by the Coronavirus, what kind of recession it is likely to cause, and what the recovery prospects are based on history.

Market Updates

Market Update | May 2020

Market Update | May 2020

As we continue to live through the global pandemic, the overall outlook continues to be murky, but less so as time goes by. When the outlook in the market is uncertain, market volatility is usually driven by conflicting investor sentiment resulting from a dominant market-driven event such as COVID-19.

April ended with nearly half of the S&P 500 reporting earnings, and it surprisingly showed the smallest weekly change since the first week of the year, which reflected ongoing investor sentiment of optimism as the economy slowly begins to reopen.

The Fed is still leaning in the short and mid-term, towards an accommodative environment in which monetary policy will keep the discount rate at near 0% for some period of time, even as growth returns to the economy in the coming months. The Fed has made clear that the spigots of the money supply are open, as market security purchases would likely include corporate bonds, and a whatever-is-necessary strategy would remain in effect until the crisis subsides.

The trend in non-farm payroll data will be closely watched, as expectations are for weak employment numbers for the rest of the year, with the hope of systematic improvements as the economy opens up. Fiscal policy stimulus measures and rescue packages give some hope that the employment trajectory will improve rapidly, but many small businesses will be lost, resulting in an unemployment rate that is unlikely to return to pre-covid levels in the near term.

These volatile times prove that you need a goals-based approach to your portfolio management strategy, and a clear understanding of how your portfolio will adjust to market volatility before these type of events occur, so you are adequately prepared to survive and thrive in the future.

If you have questions, concerns, or would like to discuss this further, we would love to hear from you; please email or call us at 480.346.1283.

Building Rocks

Business Owner Survival Guide – A Plan of Attack

By John M Hebert CPM® CFP®
Business Owner Survival Guide – A Plan of Attack

The business owners that survive this crisis won’t be those sitting on the sidelines gnashing their teeth, they will be the warriors who develop a plan of attack to win the war. Here are the five points of attack you need to implement your plan:

1. Rethink what your business can do
A business is a skilled combination of capital and labor. Take stock of your capital:

  • Facilities
  • Inventory
  • Technological & physical equipment

What can you do with those assets right now? How can you benefit others? What pain can you alleviate in society? Get prepared to engage.

Same with you and your employees. What skills do you/they possess? What do they do well? Dig deep into who they are and how they can be an enormous part of your team’s game plan. Engage, inspire and listen…you aren’t the only one with good ideas. Give everyone ownership!

2. Repurpose your assets to create new products and services
Smart teams get publicity. Why? Because they get creative; alcohol distillers make sanitizers, restaurateurs’ feed medical professions and first responders, and car manufacturers build ventilators. What can you do? I am willing to wager plenty.

3.Improve your communications
Are you communicating with your customers and clients? We at Modernize Wealth are ramping up rapidly with more videos on our website, hosting client progress meetings on Zoom, performing complete electronic on-boarding for new clients, hosting webinars and using more interactive technology to increase our communications. We are writing more articles and publishing on LinkedIn and Facebook. What are you doing?

4. Reexamine your financial assets and liabilities
Take stock of your cash flow. If you haven’t done this, call your CPA or call us here at Modernize Wealth at 480-346-1283. We can help you understand your cash flow position and help to develop a strategy to get you to the other side of this crisis. Talk to your banker and if you don’t have one, we can refer some very good people that will help you.

Also talk to your creditors and suppliers. They can be an enormous help to you and your team. You won’t be the first to need help during these times, and the more forthright business owner is the more respected one. Your honesty with your creditors and suppliers will be appreciated and will often be rewarded.

5. Redeploy and re-engage your team to action
Once you’ve completed the first four steps, redeploy your assets, align your resources, create a financial plan, engage your team and attack! You will make mistakes…so what? Better to be decisive than indecisive. You can always correct mistakes, so long as you stay involved and listen to your employees, customers and strategic partners.

You Can Survive and Thrive

As you march forward, constantly review these five points and update as necessary. We at Modernize Wealth will be here for you. Please reach out to me at 480-346-1283 or email if you have any questions, or just want to discuss further.

About the Author

John Herbert’s financial industry gravitas comes from almost 30 years’ as a Certified Financial Planner and Certified Portfolio Manager. An accomplished educator, John taught Economics at Chapman University and the University of Phoenix for many years. Sensitive to finding a balance between business, family and finance John has always had a passion for helping people build long-term wealth for their families.

Plan 1 2 3

Three Things to Help you Navigate the Economic Impact of Coronavirus

Three Things to Help you Navigate the Economic Impact of Coronavirus

It’s time to think about a way forward out of the coronavirus pandemic from a financial planning perspective. Brandon Hebert, CPWA®, CEPA® CEO of Modernize Wealth, has three quick tips for your financial plan, as we all start to think about recovery and a future beyond social isolation and stay at home orders.

If you have any questions or want to talk about your financial plans, call Modernize Wealth at 480.346.1283 or email

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Four Investment Concepts for Volatility

Four Investment Concepts for Volatility

What can you do in times of volatility to make sure your financial investments stay in line with your goals? Brandon Hebert,  CPWA®, CEPA®, CEO of Modernize Wealth, presents four quick tips to help you figure out where to start when it comes to evaluating your investments. If it’s been a while since you did an investment evaluation, especially given the long bull market we’ve just experienced, take a couple of minutes to watch this.

If you have any questions or want to talk about your investments and your financial goals, call us on 480.346.1283 or email

Business Survival Kit

Business Owner Survival Kit

By John M Hebert CPM® CFP®
Business Owner Survival Kit

You are a member of the club that is the true engine of the economy. Collectively you employ most of the workers and purchase most of the capital equipment larger businesses produce. There is no economy without you. Yet at this moment there is a sense of anxiety not felt since the great recession, and you can’t even keep your doors open to serve any customers or reach out to find new ones. Loyal devoted employees who are like family are frightened and looking to you to provide comfort and security. How are you going to cope with an invisible enemy that has placed you and your family’s future in jeopardy?

Anybody that is there to tell you that things will work out just fine by being patient, is not helping you survive. You need more. As a small business owner myself, I can appreciate your situation like so many others. There are steps that, if you haven’t already taken you need to do so immediately. Procrastination is not an option.

First, reach out to your CPA to understand your current tax position in light of the new rules in place. Tax payments that can be delayed can preserve funds that may be needed to get to the other side of this pandemic. Be certain you are taking advantage of every tax saving opportunity. If you have a bookkeeper go over all of your bills and obligations. Find out what expenses are currently not occurring during the shutdown period. Review what your periodic obligations are, and contact your lenders and those to whom you make periodic payments to, so you can know with certainty what policies they have in place for payment deferral options to a time when the world returns to normal. This includes your landlord, utilities and anybody you can think of.  You must protect your credit scores, but many lenders have been given monetary support from the Fed and well as the most recent stimulus package by Congress. These programs were meant for you!

Once you’ve determined what must be paid, what the current spending levels are at, and what obligations can be deferred, you need to speak with a good financial or wealth advisor to create a plan. Know how you can have your assets work for you, what may be an appropriate amount of debt to carry and what will be needed to help you get through the current economic situation.

Lastly a good wealth advisor will work with good lenders who can go through with you all of the new and existing lending programs available to help you. Borrowing rates are very low right now, and underwriting standards have been relaxed to help you qualify. The SBA has programs for payroll support and for disaster relief including the effects from COVID-19. There also business development program loans, and many programs are available even if you have an existing SBA loan. We can recommend some very good lenders who are eager to help you access the right programs for your business.

You can survive this and you will thrive in the future. Inertia is not an option, and there is help and support for you so please reach out to us, and we will be there for you.

Please reach out to us at 480.346.1282 or if you have questions or just want to discuss further.

COVID & Financial Markets

What’s Really New?

By John M Hebert CPM® CFP®
What’s Really New?

The benefit of having been around for over 40 years in the financial world is that it becomes easier to realize that, while the COVID-19 pandemic is a new problem, it has many of the same features as other periods of crisis. The dance steps are as follows: problem appears, problem gets worse, crisis is declared, markets tank governments and private businesses search for solutions, eventually solutions begin to surface, markets snap back, and things slowly begin to return to normal albeit with a new normal.

My first brush with this phenomenon occurred in high school with the original energy crisis and Watergate. This started with our support of Israel in the six-day war, the ensuing Arab oil embargo, the rapid rise in oil prices, the 50% drop in the Dow, Gasoline rationing, energy efficient cars from Japan (owned one), the market recovered by 1976 and a returned to a new normal.

I invite you to look back over the last 50 years or longer to prior periods of crisis and look at the progression of events for each. Did you notice they all follow the same steps? Up till this week, from the middle of February to the beginning of this week, we have completed the following steps: problem appears, problem gets worse, a crisis is declared, market tanks, governments and private businesses search for solutions, eventually solutions begin to surface, and as of this writing markets begin to snap back.

Government solutions are often very clumsy, disjointed and rife with the potential for abuse and corruption. Private business by and large will invariably be more efficient create products or services that will alleviate the pain of the existing problems and produce goods and services to create a better living situation of all of us. As the Fed literally fired every bullet in its’ arsenal, and the Federal government has created a spending bill that would make sow blush, surely at some point there will be a different problem to reckon with.

As for now, due to technological innovation and the rapid response from government has been as quick as I have ever seen it. We do learn as a society about the dangers of wasteful delays, therefore it may very well be the case that as quickly as the markets fell and the response to the virus was implemented, the recovery for both market and public health will be quicker than anybody is currently anticipating.

Now, all eyes are on the progression of the disease. As soon as we see the curves for new cases and death rates flatten, markets will smoke out the timetable for a return to normal albeit a new normal. The President has indicated that Easter is a target date for beginning to open up the economy. It’s widely recognized that opening up the economy too early may invite a relapse of the crisis. I suspect that Easter is more likely to be a time where a plan will be put in place to carefully and selectively reopen the country for business over a period of time with benchmarks to reflect improving health conditions.  As the disease is brought under control and the economy reopens the market will complete its recovery.

Please reach out to us at 480.346.1282 or if you have questions or just want to discuss further.