If former Vice President Joe Biden wins, the Fed will try to reassert its independence. Biden has also said he would raise income taxes on people who earn over $400,000 annually. Kelly notes that since the top 10% of earners account for virtually all the savings in America, a Biden administration could ultimately result in a lower savings rate.

How Clients Spend And Invest
The prospect of very low interest rates for the next decade will leave retirees challenged for income. How America spends in the new abnormal may partially dictate how it should invest. Early evidence from May unemployment and retail sales results suggests that some type of V-shaped recovery is still a possibility.

Indeed, the 17.7% jump in May retail sales implies that pent-up demand is already building. “We’re social beings. It will be hard to stop people from partying when this is over,” Kelly says. “I can’t wait to jump on a plane and go to a Broadway play. By late 2021 and early 2022, the economy will be growing very rapidly.”

But Kelly also acknowledges that inequality could be a serious constraint on the recovery. “In the last expansion, poorer people couldn’t borrow and wealthy people wouldn’t spend it,” he says.

When it comes to investing, Sheets sees two sectors that are emerging as clear winners. “On the one hand, technology will become more central and critical to our future,” he says. Still, there remains “enormous uncertainty about how these companies should be valued.”

Sheets also thinks the U.S. could enjoy a productivity renaissance. For the last 20 years, it’s been largely absent. He believes that’s because technology wasn’t diffusing itself through the economy the way it has been during the pandemic.

If people decide to permanently spend more time working at home, consumer staples should benefit. Some packaged goods companies are enjoying unit sales gains they haven’t seen for decades, thanks to housebound consumers. For    retirees, many of these businesses pay generous dividends.

On the downside, Sheets thinks that more people will become more aware of safe health practices and virus transmission among large groups. That could inflict long-term damage on industries that rely on face-to-face contact.

The most obvious solution to the retirement income problem is to work longer. Surveys suggest many Americans want to, but research by Morningstar’s David Blanchett revealed that’s not always an option. The average American retires at 63.

Kelly believes clients’ fixation on avoidance of principal withdrawal is misplaced. “Don’t assume you have [to be] paid by dividends and coupons,” he says. “There is nothing wrong with systematic withdrawals and annuities when asset prices are so high.”     

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