Over this past month, our daily living standards have been turned upside-down as the world attempts to slow the spread of the COVID-19 Coronavirus. The economy has understandably sustained a hit, with most Americans sheltering down in their homes and avoiding social contact with others. Although this is a bleak time for all, it is important to start thinking towards the future and the recovery ahead. We will unquestionably experience more volatility in the coming months in the stock market as the economy eventually begins to rebound from this sudden shutdown.
Government & Federal Reserve Policies
Both the Government and the Federal Reserve have taken drastic and historic measures to provide aid to Americans and businesses during this time. At the end of March, the CARES Act was signed into law, releasing $2 trillion in relief to millions of Americans and U.S. businesses. This includes $1,200 checks to American taxpayers ($2,400 to married couples) and four months of additional $600 payments to those claiming unemployment. (1,2)
For the first time since 2008, the Federal Reserve lowered interest rates twice last month, beginning with a half percentage cut on March 3, and a full percentage point on March 15. The Fed has also begun to purchase distressed debt assets and has injected more cash into the markets as the demand for the dollar had sky-rocketed over the course of the month. (3)
All these measures have been implemented to keep our financial system functioning and to aid Americans who may have lost their ability to work during this time. While these steps will provide short-term relief, further measures will likely be needed in the months ahead to assist in the recovery efforts.
China, where the first widespread outbreak of COVID-19 occurred, has recently reported a considerable drop in cases (though, it is difficult to verify their numbers). Many experts, both in the financial and medical fields, are keeping a close eye on the rate of recovery from the countries where the first outbreaks occurred in order to better gauge a recovery timeframe for the United States.
A drop in the energy sector accelerated last month's sell off with light crude dropping 55.17%, a decline which is clearly evident at your local gas station. The drop was attributed to Saudi Arabia and Russia, who show no signs of
The sudden shutdown of global economies caused rapid declines in almost all asset classes last month. Amid uncertainty about the duration and impact of the COVID-19 virus, it’s difficult to say how much volatility might be ahead. There will undoubtedly be tremendous buying opportunities in the stock and bond markets once a recovery timeframe is more clearly established. The stock market generally prices assets approximately six months into the future, so it is likely that a financial recovery will begin before our economy fully mends from these shutdowns.
We wish you and your family good health and safety during these times. We will continue to be working remotely until April 30, or until there is a consensus that the spread of the virus has diminished. We are always accessible via phone or email, and please do not hesitate in reaching out to us regarding anything that we can do to help
Monthly Financial Tip:
The deadline to make tax year 2019 traditional and ROTH contributions now falls on 7/15/20.
1 - CNBC.com, March 30, 2020
2 - Forbes.com, March 29, 2020
3 - Reuters, March 31, 2020
4 - CNBC.com, April 1, 2020
5 - Nikkei Asian Review, March 31, 2020
6 - Forbes.com, March 31, 2020 7 - CNN.com, March 31, 2020
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Bob Lawson is not engaged in rendering legal or accounting services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.