Coronavirus and the Markets

Coronavirus and The Markets

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What You Need to Know

With coronavirus (COVID-19) all around us, investors eye how their investments will fare as this ‘global pandemic’ spreads. Earlier market movements starting in February 2020 were the result of unassociated economic factors and the public’s reaction to fear. Now, while the U.S.  economy is impacting, investor’s resilience to react will be tested. The ‘markets’ hate uncertainty and how much COVID-19 will affect economies and for how long is yet to be determined. 

Congress has recently agreed to a $2 trillion rescue plan for the economy to offer assistance to the many Americans affected by the coronavirus. We wanted to give you a quick update regarding the main points of the bill.

  • Direct cash payments to individuals of up to $1,200 depending on your current income. For every qualifying child under the age of 16, there will be an additional payment of $500. Income limits:
    • Single adults with Social Security numbers who are United States residents and have an adjusted gross income of $75,000 or less would get the full amount
    • Married couples with no children earning $150,000 or less would receive a total of $2,400
    • And taxpayers filing as head of household would get the full payment if they earned $112,500 or less
    • Above those income figures, the payment decreases until it stops altogether for single people earning $99,000 or married people who have no children and earn $198,000.
    • According to the Senate Finance Committee, a family with two children would no longer be eligible for any payments if its income surpassed $218,000.
  • A boost in weekly unemployment benefits of up to $600 – this will phase out on July 31st.
  • Extended paid sick leave to help individuals to cope with the virus.
  • $500 billion in loans and assistance for large corporations.
  • $350 billion for small business loans $340 billion for state and local governments – part of these funds will help fight the virus the rest to make up lost tax revenues.

This does not mean we are out of the woods by any means. We expect the market volatility to remain elevated and there is a real possibility that since the Fiscal stimulus bill is passed and the focus returns to the virus, the markets could retreat again – perhaps to the old lows or below.  Having said that, it does appear the “sheltering in place” order is helping to reduce the spread of the virus and once the number of new cases begins to diminish we feel the markets will begin to respond in a positive way and begin to discount a return to positive economic growth.

One thing for investors to consider is that while COVID-19 is active, markets are still trading regardless. Even though exchanges halted trading in early March to stem the decline, a technique used to force a pause and reduce the pressure of panic selling, market volatility will continue for some time. Additional steps to curb the impact, most recently by The Fed lowering rates, will help support a slowing global economy over the next weeks to months.

What investors should keep their eye on during the upcoming weeks, if not months:

  • Market swings- heightened volatility will create its momentum as investors are concerned and likely to sell.
  • Interest rates- with The Fed’s intervention, investors are hoping for lower rates, reflecting in overall economic uncertainty.
  • Bonds- will continue to move higher on concerns over slowing growth. 
  • Sector stocks will impact- dependent on trading to avoid portfolio loss to manage risk.
  • Economic and political data- will impact markets for the next weeks and months. It is not unusual for an election year to increase trading, which is not correlated to market loss or gains, regardless of election outcomes. Future jobs and economic reporting due to COVID-19 may impact.

During periods like this, we recommend investors consider a similar approach to halting trades to stem their own portfolio’s decline. When investors give in to emotion at the wrong time and pull assets out of the market, inevitably, they create a loss that is difficult to recover. If you have concerns about your portfolio during this heightened period, feel free to contact our office at any time.

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