By Michael Gold, CFP® MBA Founder and CEO, Wealth Advisor
How’s your 2020 going so far? Unsettling? Unexpected? You’re not alone. The world as we know it has been turned upside down by five letters and a number: COVID-19. While the coronavirus pandemic is at its core a health issue, the downstream effects of it on other aspects of our society have been significant, perhaps the greatest being economic. As we reach the mid-year point of 2020, let’s take a look at what is going on in the economy, most of which can trace its roots back to COVID-19.
The Drama Of The Stock Market
The year started off strong, with the S&P 500 reaching all-time highs and peaking on February 19. Then it all fell apart. In a little over a month, the index fell 34%, bottoming out on March 23. It’s been a bumpy ride, but the market has climbed out of the hole it was in and gained back 36% (as of May 27) from that low. (1)
Now, it may seem as if the S&P 500 has made up for all of its losses if it lost 34% and then gained back 36%. However, that is not the case because each percentage is based on its relative high or low. The index peaked at 3,386.15 points before falling 34% to 2,237.40. That loss was 1,148.75 points. Growth of 36% from the low point only accounts for 798.73 points, which means that the index overall is still down 10% from February’s high.
In addition to stock prices improving, volatility is calming down as well. In mid-March, things were swinging around so fiercely that the S&P 500 achieved double-digit movement in single days. Things have calmed down a lot since then, but volatility is still higher than it was pre-crisis. Things just seem calm now compared to the craziness of what has been called the longest March ever. (2)
Perhaps the area that has been impacted the most by the COVID-19 containment efforts is employment. It’s hard to keep a job when companies are shutting down and people aren’t allowed out of their homes. Weekly new unemployment claims have shattered all previous records by multiples. The official unemployment rate for April is 14.7%, though estimates put it closer to 20% due to some data-collection errors. (3) There are now approximately 25 million Americans receiving unemployment benefits (4) on top of millions who have seen hours and wages cut and business revenues fall.
Federal Reserve & Government Intervention
The Federal Reserve stepped up early on in the pandemic to slash rates to near zero. It has also worked hard to provide financing for businesses trying to stay afloat in these turbulent waters.
Congress has passed a number of bills to aid both individuals and organizations, the largest being the $2 trillion CARES Act, which was signed into law on March 27. The Act provided individual stimulus checks, enhanced unemployment benefits, and loan programs to help businesses. Despite extreme actions taken by both the Federal Reserve and the federal government, some economists still say that they will need to do more before meaningful recovery will take place. (5)
As the country eases out of lockdown and restrictions are being loosened, there has been an uptick in economic activity, though not enough to stop the economy from contracting. The leisure and hospitality industries have been hit the hardest by the stay-at-home orders (6) while the service sector is still struggling under social distancing guidelines. (7) Factory activity is still down and agricultural conditions are deteriorating. (8) Overall, pessimism reigns supreme over the economy even while some Federal Reserve policymakers believe we are either at or near the bottom and are expecting a rebound in the second half of the year. (9) The global economy is continuing to decline, but at a slower pace than it did in April, (10) which seems to confirm their predictions.
How Should You Respond?
As you can see, this year has been anything but normal so far, and there are more than likely going to be even more plot twists as we enter the summer and fall. While the global economy seems to be gasping for breath, it is not the end of the world. We may have some hard months and years ahead of us, but it isn’t the first time our nation has faced challenges like this.
While our economic woes may not be new for history, they very well could be new for you. In difficult times like these, it is helpful to have a trusted advisor that you can turn to for financial guidance and support. If you don’t want to go through this economic crisis alone, our team at Gold Family Wealth, LLC is here for you. Reach out to me at [email protected] or (800) 303-2533 so we can have a no-obligation conversation about where you are and how we may be able to help.
Michael Gold is the Founder and CEO, Wealth Advisor of Gold Family Wealth, an independent wealth management boutique and named one of the Top 100 People in Finance. Michael has 20 years of experience in the financial industry and has a bachelor’s degree in business and economics from the State University of New York College at Oneonta, an MBA from NYU Stern School of Business, specializing in Quantitative Finance and Leadership, and his CERTIFIED FINANCIAL PLANNER™ (CFP®) credential. He serves business owners and entrepreneurs by stress-testing their financial plan to identify red flags and missed opportunities. Michael strategically outsources professionals from various fields, such as tax, insurance, retirement and trust, and estate law to collaborate on potential solutions to help position his clients to pursue their desired goals.
Michael currently lives in Westport, CT. When he’s not working, you can find him spending time with his wife, Giselle, their three children, Sebastian, Aria, and Pierce, and their dog, Charly. To learn more about Michael, connect with him on LinkedIn.
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