Since the beginning of the COVID-19 pandemic, businesses have been forced to shut their doors, lay off employees, and learn to cope with a lack of revenue. As individual states have expanded and extended stay-at-home orders, the stock market has responded with significant drops. When markets experienced a big drop in late March, the Federal Reserve and Congress took a number of measures to contain the economic damage from COVID. What are those measures, and are they working?
After canceling a planned slate of benchmark interest rate hikes, Fed Chairman Jerome Powell announced an emergency rate cut in early March. This announcement spurred on a 15-minute rally that was quickly quelled by a selloff, plunging markets around the world into deep negative territory. Market indices remained relatively flat throughout April. Under normal conditions, such drastic interest rate cuts might have been enough to create a real economic recovery but, for now, at least, markets have not responded positively.
With social distancing measures bringing industries like retail and luxury services to a grinding halt, millions of Americans lost their jobs over the course of a few weeks. 25 million people applied for unemployment benefits in April alone, completely erasing the 23 million jobs created in the decade since the 2008 recession. As out-of-work Americans searched for relief, Congress passed the CARES Act, designed as both an economic stimulus payment and an expansion of unemployment insurance at the state level. At the same time, they authorized billions in loans to small businesses in the Paycheck Protection Program (PPP) aimed at allowing them to maintain current employment levels throughout the lockdown. The PPP’s funds quickly dried up without making much of an immediate impact. Presently, stimulus checks and unemployment benefits have been slow to trickle in. With the funds set aside in the stimulus set to be depleted by July 2020, it’s possible these measures will not be enough to give our economy the boost it needs.
As the COVID crash continued, the Fed decided to revive the Quantitative Easing (QE) program that helped bring us out of the 2008 recession. Unfortunately, their announcement that they would be buying $500 billion in U.S. Treasury Bonds and $200 billion in mortgage-backed securities over the course of 2020 did little to calm investor fears. Stock market indices remained flat even as the Fed’s Open Market Committee agreed to expand QE purchases to an unlimited amount. While the QE strategy has worked in the past, it may not be enough to get markets moving again this time.
While the Fed’s measures may have staved off a full-on recession, they haven’t yet created the conditions for an economic recovery. From Wall Street to Main Street, millions of Americans are left to wonder when lockdowns will be lifted, and whether or not efforts to get the economy moving will ultimately be successful. If the COVID-19 pandemic continues to keep businesses closed, things are likely to get much worse. For those in or near retirement, a crash like this can be devastating, as millions of investors found out in 2008. If you’re concerned about the future of the stock market (and your retirement nest egg), it makes sense to investigate alternative financial vehicles that can protect your principal during a market downturn. Over 5,000 investors have already found out what a Crash Proof Retirement ®® can do for them; tune in to the Crash Proof Retirement Show ® or give us a call at 1-800-722-9728 to find out for yourself.