Mellody Hobson Shares Economic and Personal Finance Lesson on IG Live with Najah Aziz

Over 400 people tuned in to a timely conversation about personal finances, the economy, and financial literacy on IG Live hosted by celebrity stylist Najah Aziz and owner of Like The River Salon in Atlanta, with guest Mellody Hobson, co-CEO and president of Ariel Investments. The Instagram Live conversation is a part of Aziz’s “At Home Q&A” series where she interviews women in her network. And while Aziz is not a journalist by trade, she is utilizing her social following of 288K people on Instagram to have relevant and meaningful conversations while people are sheltered in place during the COVID-19 pandemic.

Hobson is a business luminary and woman of power who did not hold back about the resilience of black people during challenging times, how to remain financially healthy, what you need to know about the economy, and how to protect your peace during the natural disaster the health crisis has caused. Let’s just say that Aziz’s and Hobson’s conversation was everything!

Najah Aziz, Celebrity Stylist and owner of Like The River Salon

If you weren’t able to tune in, here’s a transcription of the conversation, questions, and Hobson’s responses.

Mellody Hobson on the Economy

Question: If we go into a shelter in place for say, three months, what is your prediction of our financial outlook of the country? And how do we come back?

Hobson: I don’t want to do the hypothetical of ‘if.’ I think we deal with these situations as they come. Right now, we’ve been sheltered in place for weeks. And, the president is signaling that he’s hoping we can begin to open parts of the economy starting in early May. Now, who knows if that is going to happen or not? Governors are starting to work on this. I’m in California right now and governor Newsome started to suggest what a reopening could look like. He’s working in concert with the governors of Oregon and Washington. And on the East Coast, we know that a whole bunch of East Coast states are working together with New York, New Jersey, Connecticut, Rhode Island, Massachusetts—all talking about what would this look like? As it relates to the economy, stopping the economy like we have done—it is never been done, ever. We’ve never done this globally. We are in an unprecedented moment.

I had a friend who told me, ‘Our economy is in a medically induced coma.’ We put it into a coma to stop the health crisis. So, we have a financial crisis that’s come out of a health crisis. My outlook, however, remains optimistic. I know these are hard, hard times people are struggling and stuff. I know it. I do understand, I did not grow up with any money. And I know what this is like although this is quite not quite like anything we’ve ever seen. But I do believe over the long term, the US economy has proven to be pretty resilient. And what I’ve been doing is I’ve been going back and look at all of the past crises, even of my time, when the stock market crashed in 1987, when we had 9/11, where the stock market was closed for six days, when we had the global financial crisis, which was the biggest recession since the Great Depression. And now this. And if you look even before that Vietnam War, World War One, World War Two, the Cuban Missile Crisis, the oil embargo of the 70s coming out of all of those periods, 12, 24, 36 months later, you saw a recovery in the economy.

I don’t think this will be any different. No, that doesn’t mean there won’t be real damage here and lasting damage—but I do think over the long term, we’ve been able to see the US economy be fairly resilient. And so hopefully that gives people some hope. Who would have thought? I know this is a long answer that coming out of the global financial crisis that we had in ’08 and oh ’09, that just a few months ago, we’d be at virtual full employment in this country. The unemployment rate was negligible. When you were back then no one could have imagined that that would have happened. The stock market got cut in half during that period, it was down 52%. It’s up over 400% since then, so we need to have our perspective to understand what is really possible, even though this moment right now feels really bad.

Hobson on Humanity 

Question: What do you see as some of the biggest positive changes to the way we live our lives as a result of this pandemic?

Hobson: I think that it’s really great to look for the silver lining.

There have been some that have been inarguable, but probably not sustainable. I mean, let’s look at something like air pollution. The air pollution in the world has gone down pretty dramatically. And in some of the countries where the pollution is truly harmful to your health, we’ve seen those numbers drop really, really significantly. So that is one but again, probably not in the sustainable category. I think the other thing that we’ve seen is [that] people are going to be much more thoughtful about unnecessary travel. And we’ve learned that you can do a meeting with a Zoom call. And so maybe people will not be flying all over the way they have been in the past and the same sort of way will be more thoughtful. I also think, you know, humanity has shown up in some ways in such a remarkable way that it gives me faith in just people and our willingness to extend ourselves to each other. And that’s everything from people doing birthday parties for kids. Where they drive around in a parade, to all the things that we’ve seen that our healthcare workers and frontline workers have done to put themselves at risk for the greater good. It is truly inspiring.

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Hobson on the Stark Market

Question: What strategies would you recommend if we are going to continue to place money in the stock market now?

Many people participate in the stock market, rank and file workers through a 401(k) plan, or some kind of employment plan at work. If you’re in that kind of plan, and you can continue to contribute to it that’s a very, very good day. Now you’ve been laid off or furloughed, we can talk about that in a moment. But if you can continue to contribute, the great thing about a 401(k) plan is you’re buying the stock market or shares in mutual fund shares in a company when they’re high. You’re buying shares in that company a couple of weeks later when they might be lower, and over the long term, you average a better price. So, the best thing you can do is keep investing if you are contributing to a retirement plan.

Now, I recognize for many, many people in this environment that may not be possible — where you’re trying to literally have money for food, or for gas in your car, or to pay your rent or mortgage. You may have to put that aside. I totally get it so you might have to stop in that regard. Some even may have to borrow money from their 401(k) plan. Take money out normally—it’s the money of last, last, last resort.

I also recognize we are at that moment for some people, and so they may have to do that. So, if you have to pull money out, hopefully, you can do it with a loan as opposed to an early withdrawal, because you end up paying a bunch of penalties when you do that. A loan from your 401(k) plan would be better. If you’re putting money in slowly nibble just a little bit at a time, every month, every few weeks, don’t go and put a whole bunch in at once. That’s what we’re doing at Ariel. We’re just buying in slowly. This is where patience gets rewarded. Yes. And when you think about what to invest in, what we do is we look at the areas that have done the worst, not the best. And so, when we look at our own portfolio right now, we say, what’s hung in there really well. We might trade those stocks for things that have been decimated, because lots of things have just been indiscriminately sold, and that creates a buying opportunity. But if you’re going to buy You have to have a long-term view.

I’m talking looking at the next three to five years. I don’t know what’s going to happen next week. I don’t know what’s going to happen next month. But I do know this crisis will end. It’s not if, it’s when. And when it doesn’t, we will see brighter days.

Hobson on the Housing Market

Question: How will the housing market look after this crisis?

So again, no surprise, the housing numbers are down pretty dramatically, and we’re only talking weeks here. The interesting thing about the housing market before this started, there was not a ton of inventory around the country. This isn’t like the oil situation where there’s a glut, there was actually the housing inventory was not low, but it was not in a surplus. So, it might allow itself to recurrent correct. The other thing that is going to be very helpful to the housing market is that a lot of states have in cities have put non-foreclosure rules into place.

Fannie Mae and Freddie Mac are the two big government-owned housing finance organizations. They said they’re not going to foreclose during this period. So, this won’t be I don’t think this will be like the financial crisis where we saw those foreclosures and that took down values of houses on streets. If you can’t foreclose over the next 12 to 18 months, I think that will allow the housing market to hold up much better than if people were allowed to foreclose.

There’s Hope

In Closing, Hobson’s advice to viewers was to not panic. “The economic news is going to be bad for a while. It’s going to be like Groundhog Day every day. Yesterday, it was retail sales. Today, it’s the unemployment numbers in terms of people putting in for unemployment… We’re going to hear this for a while. So set your expectations appropriately. Don’t panic every time you see this, because again, remember I said, we put the economy in a medically induced coma.”

To learn more about the impact of the COVID-19 crisis and its impact on the black community, click here.