Money For the Rest of Us: Unintended Consequences Impact Everything
In a complex global economy, actions can lead to any number of unexpected reactions. Some of those consequences are known in advance. Others are not. And how market participants react to them can lead to even more unknown and unexpected reactions.
The past few years has seen a massive growth in big economic changes. The global pandemic shut down large parts of the economy, but some sectors ended up thriving.
For example, the housing market seemed like a likely candidate for a painful drop in prices and a slow recovery as people stayed at home. Instead, the decline in interest rates and a desire to move out of densely-populated areas fueled a boom.
And with many workers able to continue with remote work, stimulus payments to keep the economy open may have ended up overstimulating the economy. That may have caused most of the inflation that’s going on now.
We are still dealing with an abnormally strong job market, while also dealing with supply chain issues. And new legislation to contend with semiconductor chip manufacturing and green energy projects are already leading to changes that could result in further reverberations.
The point is, every action can have an unintended consequence. Those who think ahead to the full effect and position themselves accordingly can end up investing in the right place at the proverbial right time.