Globally, the economy has been hit hard by the Coronavirus. How each government reacts, what companies offer their employees, and which companies stay open to help nations get essentials has an impact on investments. At the start of the pandemic, the markets lost huge sums. Depending on your investments, you might see losses of over $6,000 or even millions. Three influences are affecting the market each day; the interest rate, Trump’s $2 trillion plan, and investor confidence. Based on these three concepts, you will determine what to do in the coming days and months to recoup your investments. Information regarding why the losses occurred is also important.
Mid-March, the Federal Reserve announced it would low the interest rate to 1.15%, an all-time low. The 30-year rate is 1.66%, another low. For consumers, the prices are near 3% to 3.45%. Cutting rates is a measure to save the economy, but when it happens, investors tend to take their profits and get out of the market. When tough times are ahead with no-one understanding just how much the world could be affected by the Coronavirus, investors saw significant losses if they didn’t jump out of their stocks, mutual funds, and other stock market investments.
Trump’s $2 Trillion Plan
Trump announced a $2 trillion idea to help the nation. Initially, this plan was drafted more to help the top one percent. As it has been revised and withheld from passing, it appears each US citizen, appropriately registered and a part of the workforce, is meant to receive $1,000 to 1,200. However, information states it is going to the businesses, which allows the owners to allocate the funds in payroll however they want. Given that it has not passed yet, it is definitely something to watch for to make sure you are aware of how it can impact the economy.
The nation does not have $2 trillion sitting in a bank. The US has a deficit. The only way to provide US citizens with money is for the Fed to make it. They are going to “print” the money. Whenever this situation occurs to help stabilize an economy, investments are affected.
Right now, the talk of printing $2 trillion and the shutdown of most businesses is causing the stock market to close higher than when the pandemic issues were first announced.
Many investors are adapting to a new normal. They want to get their money back, invest when things are low, and they have the time because they are unable to go to the office.
The trouble with printing money out of thin air—it weakens the dollar—Trump is hoping a nation in crisis will not cause the dollar to lose value. Instead, the “saving” of the economy, so people have funds to spend, is where most are putting their hope in a return of the investment tools.
Theoretically, putting money into the market without backing is going to weaken any currency. However, due to job losses or temporary closures with millions of people not receiving paid leave, something has to be done to stimulate the economy. Money is spent in grocery stores, online, and for essentials is essential to ensuring stability.
The first couple of weeks with tourists still traveling, the virus spread in all but a few states, and announcements of shutdowns and possible restrictions caused the market to lose significant value.
Now, with the $2 trillion plan and people seeing the impact, plus having time, more are attempting to invest in the market. Gains for almost a week have occurred, so some losses have been recouped.
Investors are confident in the talk of a plan to put money into the economy, when many may run out of their paychecks and have nothing but credit to spend.
Investors are not believing in a miracle but instead attempting to make money while they have the time and based on the “new normal” while most things are shut down.
CNN announced stocks closed higher than they did the previous week, for the last half week of March. Oil is at an 18-year low. Most people see this when they drive by their gas stations. Prices are sinking near $1, and in mountain towns, the cost of fuel is under $1.90. For crude oil prices, the cost is $20 per barrel.
Oil is lower because people are not demanding it. Countries are literally making sure fewer drivers are on the road. But not all have succeeded.
Taking a look at an article in the New York Times between Italy and China, regarding pollution from a year ago to last week, it was clear, Chinese citizens stopped going out, but in Italy, they kept traveling. The US, especially from images of New York City, is showing vacant streets as no one has ever seen. So, the demand for oil is low, while the supply is continuing to increase.
The Dow rose another 3.2% on the close, March 30, 2020. The S&P increased by 3.4%. The NASDAQ was up 3.6%. But, what does this mean for investments?
The answer will come soon, as to what stocks are more attractive. But, for now, note that investors are keeping active in the market to show such gains.
Stock market investors are assessing what is happening with companies and the government. Some businesses are reacting with more integrity than others, which can directly impact the markets.
For example, GameStop has a bad reputation. Announcements that they were an essential business, employees, told to go to work and wear bags on their hands, all impacted the value of the stock. It was not extremely high, to begin with, but after they refused to close, they showed a low of $3.15.
Many companies will show a decline from around March 10 until March 20, 2020. Confidence in the nation was at a low. But some businesses gained quicker than others. Disney is a good example. Disney did take a hit when they announced a closure of all parks to prevent the disease from spreading. However, when most governments started shutting down travel between states and asking people to stay home, the stock got a bump. Today, it is still on the rise. At the start of its losses, it was around $120 per share and hit a low of about $85. With market confidence returning, it is up to $102 per share and climbing. Of course, these numbers are bound to change, but the point is, investors are looking for ways to get in low and earn.
When companies like Disney say their executives are taking a pay cut to help through the crises, it shows which locations have integrity and are worth investor confidence.
Trade experts are providing their opinion on the stocks one should buy while waiting out the spread of the virus. The shares can be divided into three categories: tech, dividend, and work-from-home stocks.
For tech shares:
According to Motley Fool, over five billion minutes have been spent on virtual meetings due to the Coronavirus. Cisco is one of the leaders behind creating a video conferencing platform that companies and governments are using. Webex is their baby, and it has ensured employees can work from home and still keep talking to their leaders and other staff.
No one has mentioned the medical stocks as yet, but there are definitely some companies to take a look at to see how they are doing in the market. You can bet that many of the healthcare-related stocks are showing some improvement. For those who are paying attention to companies working on a vaccine for the virus, you want to know the one that is going to edge out everyone else.
A few companies to examine for any investment opportunity include:
● Ball Corp
● L Brands
● Regeneron Pharmaceuticals
● Norton Life Lock
● SBA Communications Corp
● T Mobile
● Gilead Sciences
● Crown Castle International
These are the companies to research if you intend to put more money into the market or want to switch some of your investments. Don’t just invest without looking at what they do, how they have performed, and how they are contributing to the Coronavirus pandemic.
How to Safely Invest
Here are some tips on safely investing in the stock market while everyone waits out the Coronavirus.
1. Continue with your routine, not only how you choose and research stocks, but also your mindset. Now it is imperative that you work with the stress and keep yourself healthy.
2. Keep to your investing process. You need to realize emotional decisions are not good. Use what you have honed and look at the market and how it is performing.
3. Do not sell just because you have lost money.
4. Communicate with others to help keep your mind at ease, and to see what the experts are looking at for potential investments.
5. Always act with slow deliberation. The market can definitely continue to decline, especially with new announcements. The “savior plan” to offer everyone money is helping now, but if it goes too long and people are forced to panic again about paying for goods, the market could rapidly change.
6. Only use the money you can afford to lose. If you are tapped out, then you either have to sell one investment to make another or hold strong to your position and wait for the market to bounce back.
7. Have different investments from the short and long-term to ensure you are getting through the tough times.
8. Lastly, adapt to the current situation, enjoy life, and be glad you don’t have the virus and may not get it before a vaccine is available.
One of the essentials to investing in a troubled time—never react emotionally—don’t sell the stock because the market is losing. As you saw, within a couple of weeks, the market started to gain. It did not remain in a steady decline because governments around the world are looking for solutions. There are offers and protections in place to ensure the virus is stamped out.
Yes, some were optimistic that we could be back to normal by Easter, but the reality is, as long as people are alive, the human race can adapt.
Unless you have an investment, you want to switch to, allow your stocks to recoup their losses. One person who lost $6,000 in that initial downturn, held fast, and for the first week saw a return of $600. It is not much and certainly not the entire amount, but it is possible to gain money back slowly.
The mortgage crisis should also be a lesson for those who invest in stocks. Anyone who held their investments and rode the trouble to the very end recouped most if not all of their losses versus those who jumped out, refused to invest, and then got back in when the market was already high.
By getting out of stocks without a solid new investment plan, you are more likely to lose or take double the time to get your money back.
Coronavirus hit the world hard. As a new strain without a cure and spreading with such ease, no one knew how to react. Government officials to the lowest class citizen are affected by the virus. It is not going to distinguish between classes. So, the best you can do is stay at home, work if you can, invest your funds or keep them in the shares you already had. Eventually, the human race will adjust, self-inoculate against COVID-19, and survive.
Like any virus, building antibodies against the strain is imperative. Meanwhile, keeping a calm mindset, researching potential better investment vehicles, and keeping to what you have is essential. You will get through this along with everyone else, and already the market is showing signs of turning back to a more positive outlook.