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Why Wall Street’s no good, very bad day is not the bitter end
If you’re a doomsday prepper, the last few days may have been a relief. You were right. The color-coded gas mask bins, the sanitizer haul, the hunting gear, the closet full of toilet paper and bottled water–forgive all of us for mocking you. You’re probably even making a tidy sum selling extra face masks for $195 online. But, capitalism isn’t over yet–not according to a slew of independent analysts, NGO-researchers, economic historians, and of course, the folks from the funds that still want your money. We can avoid a repeat of 2008, said Christiane Lagarde, head of the European Central Bank, if governments take decisive, bold action.
Speaking of decisive, bold action
So far, we’ve seen a senator wear a gas mask as satire on Capitol Hill going into self-quarantine after flying on Air Force One, Harvard (and a host of other Ivy League schools) shutting down classes, and the National Guard enforcing a “Hot Zone” quarantine suburban New York.
Wall Street’s one-man pep squad, Mad Money’s Jim Cramer, acknowledged that the wiggly bounce house that the markets became this week was mostly the result of a fear of a “Corona-induced recession.” What we really should be watching is oil, according to Jim. Since America recently became a net exporter of crude, a price war would hit us hard there, as well, forcing top performers to reduce production (and leaving politicians with even fewer positive economic talking points). Thanks, Jim. Yes, oil is also scary.
What about alternative energy?
Alternative energy stocks are not an all-in-one solution, at least not if you’re looking at the numbers rather than listening to Elon Musk, who tweeted that the whole coronavirus thingy is dumb. If Elon Musk pooh-poohing the World Health Organization’s pandemic concerns via Tweet doesn’t calm the markets, what refuge have we mere non-billionaire mortals? Like any cast of a horror movie (at least the ones who survive), we have to look at the facts and then see what can be done. Right now, it’s probably best to not to investigate the interesting noise that unknown startup is making out yonder. Smart investors are not foraging for the next Get-Rich-Quick scheme, they’re letting governments do their job before rushing in. Even Warren Buffet is encouraging caution, but not fear regarding the market and the “one-two punch” of market volatility.
Europe to the rescue?
This week, America tried cutting the payroll tax to little effect. Gotcha, said the Brits, doubling down on their tea and basically throwing everything but the Crown Jewels at the sliding markets. This morning, The Bank of England cut interest rates from .75% to .25%, a historic low. At the same time, the central bank released billions of pounds to help banks rescue struggling companies with infusions of needed cash. As Wall Street’s index wobbled, spun, sank, rose, and then faceplanted like drunken college students on Spring Break, Europe (seemingly unimpressed by the end of the day with the payroll tax cut) is also looking for ways to avoid the global recession party. Italy is jumping in with a $28 billion stimulus package and the International Monetary Fund pledged $50 billion to support the global recovery last week. Leaders are still squabbling, however, on who will end up footing the bill for a massive European bailout.
Stay calm and please carry on
Disconnect your panic button. Market corrections have occurred frequently before throughout history and this, although intense, is a part of that unhappy tradition of world events upending Wall Street expectations. There have been 26 market corrections since WWII, with an average of a 13.7% decline. This is not good, but it isn’t the end. While analysts have suggested gold is still a safer haven, the best strategy is to wait and see. Use common sense to drive your decision-making and warm yourself with data. Start with our personal finance section and get an accurate view of your financial status and take an honest look at your strengths and vulnerabilities. What should you do with your savings? Look at our recommendations for keeping your money safe online and in the markets.
Written by Carla Rover
Carla Rover has covered Silicon Valley, Wall Street, media, and technology since 2010.
Is the U.S. closer to a recession?
The coronavirus is eating away at economic prosperity by targeting both supply and demand factors. “The global macro outlook has taken a turn for the worse,” writes Standard & Poor’s analysts. “Both supply and demand effects are in play, and both are being amplified by tightening financial conditions.”
This is how a virus could cause a recession in the U.S.
In an attempt to stymie the virus and stay healthy, companies and individuals take cautionary measures. Big companies institute work-from-home policies (Twitter, Google), taking thousands of workers out of central business districts where they normally spend money. Other firms cancel non-essential work travel (Ford, Salesforce), leaving hotels and airlines scrambling to cut back hours for their employees and stop hemorrhaging money. Airlines cut flights (Delta and American Airlines). Conferences are cancelled (SXSW), people stop going to baseball games. Employees get nervous about their jobs; they stop going out to eat, stop buying non-necessary goods and services. Service industries start laying off employees. Gig economy workers can’t find long-haul trucking routes and no one is hailing drivers on their rideshare app. Consumer confidence plummets.
But that’s not the only issue. While factories in China have slowly started reopening, U.S. west coast ports have seen shipments fall so far this year. Both component goods and finished goods may be in short supply. Companies start laying off employees. Unemployment claims rise. The cycle begins again.
“And when these shocks are synchronized across many countries, the effects can be further amplified through international trade and financial linkages, dampening global activity and pushing commodity prices down,” wrote Gita Gopinath of the International Monetary Fund (IMF). With downward supply and demand pressures on the economy, economists are calling for stronger action from the federal government. Both President Trump and Congressional democrats are working on a payroll tax to ease the burden for both individuals and businesses, but it may not be the vaccine the economy needs.
Written by Kate Chrisman
With a degree from the London School of Economics and almost a decade of following Asian energy markets, Kate Chrisman is now an editor with DoughRoller.net.
“Disruption to everyday life may be severe”–this according to the CDC on February 25th. Two weeks later, all eyes are on Italy’s nationwide quarantine. What does this mean for us, the average American? Will we also be forced to self-quarantine? And for how long?
The first thing to remember is while there is so much uncertainty around what exactly we should expect, it’s important not to panic. Here are some practical ways we can prepare ourselves for the next few weeks:
- Home: Keep two weeks worth of food and supplies on hand. There’s no need to buy one hundred rolls of toilet paper or to stock up on face masks (please leave these for the medical professionals who need them far more than we do). Instead, the U.S. Department of Homeland Security recommends stocking up on food, toiletries and medications. Still not sure what to buy? Here’s a helpful list.
- Work: Be prepared to work from home, if possible. The U.S. Department of Labor Wage and Hour Division is encouraging employers to be flexible with workers, especially if there is a government-imposed quarantine. Options may include teleworking, paid time off, even staggered work shifts for those employees unable to work from home.
- School: Schools across 21 states in the U.S. and 32 countries around the world are closed according to data from the United Nations. How do officials at these institutions decide when it’s time to temporarily shut down? This information from the U.S. Department of Education can give you some insight. In Hong Kong, schools have been closed for more than a month. While some students there are taking virtual classes, it’s not an option for those without internet access. This article offers a glimpse of the situation in Hong Kong and an idea of what could happen elsewhere.
- Recreation: Major events around the globe are being canceled, including the South by Southwest festival originally scheduled for March 13 – 22 in Austin, Texas. Some sporting events are likely to go on as scheduled, though it’s also possible events will eventually be closed to spectators. Before committing to attending an event, especially if it involves buying tickets and booking travel, find out about cancellation policies. You don’t want to assume you’ll get your money back if you are unable to attend.
- Travel: The CDC is recommending avoiding nonessential travel to China, Iran, South Korea and Italy. Those most at risk (older adults or anyone with chronic medical conditions) should consider postponing travel plans to Japan and exercise caution if traveling to Hong Kong. It is not recommended for U.S. citizens to travel on cruise ships, especially those most at risk of infection. If you do choose to travel outside the United States, be prepared to self-quarantine when you return to the U.S. Before you pursue travel plans, visit travel.state.gov for the latest travel information related to coronavirus.
Fear not, we can adapt
Americans are accustomed to convenience. We don’t like to wait in long lines. When we shop online, we expect our shipment to arrive in two days. Anything we may possibly need can usually be found at our local supermarket. So when the CDC says to be prepared for disruption in our lives, that may be longer lines at the grocery store. Some of us may be forced to cancel travel plans. We may not be able to order what we need online and we may have to stay home for a consecutive number of days or weeks.
Consider this–of the 1.4 billion people in China, about 80,000 coronavirus cases have been reported. Of those, it seems more than 61,000 citizens have recovered, allowing China to slowly begin the healing process. One thing is certain, while this pandemic is a disruption, it is no apocalypse.
Written by Christina Castle
Christina Castle is the Managing Editor for DoughRoller.net with 12 years of combined experience in broadcast news, media relations and marketing.
What if you need to travel?
For some, the concern surrounding coronavirus isn’t enough to avoid travel altogether, especially since we don’t know how long this outbreak will last. Whether you have existing plans that you really don’t want to change, you need to travel for work, or your trip is simply unavoidable, there are a few things to know if you plan to travel.
Credit card travel insurance
Personally, I always use my Chase Sapphire Preferred card when traveling, as it offers excellent trip cancellation and delay coverage. When it comes to coronavirus, though, you need to know that this coverage is limited.
Trip cancellation coverage
While there are many reasons you can cancel a trip and still have your credit card travel cancellation coverage kick in, the fear of contracting coronavirus isn’t one of them. In fact, some credit card issuers explicitly exclude epidemics and pandemics in their coverage disclosures. With many areas declaring a state of emergency–and Italy going into full lockdown–it may not seem wise to keep travel plans to those areas… but this doesn’t mean your credit card cancellation coverage will help.
In the Chase Sapphire Preferred guide to benefits, for instance, cardholders are warned that “The Trip Cancellation and Trip Interruption benefit does not apply to any loss caused by or resulting from, directly or indirectly: Your disinclination to travel due to an epidemic or pandemic.”
This means that choosing to cancel a trip to a coronavirus-filled area is still a choice, and therefore not covered.
With that said, you can still take advantage of new waivers and protections being offered by airlines, hotels, and even rental car companies. Many major airlines are waiving change fees for travelers, especially if their flights are bound for high-risk areas, and even allowing for cancellations on non-refundable tickets.
What if you get sick?
Now, if you or a family member were to contract coronavirus (or any other illness) and were unable to travel, your credit card cancellation coverage would likely apply. It’s important to note the coverage limits offered by your card as well as the documentation necessary to support your claim.
Card issuers like Chase will require a physician’s note at the very least, so be sure that you can support your claim if canceling your trip due to an illness.
What if you decide to travel anyway and fall ill while you’re away from home? If you have a card like the Platinum Card from American Express, you may be able to call on your credit card’s trip interruption coverage.
This coverage can help you book a new flight home, cover prepaid hotel or travel fees for the rest of your stay, handle added fees for returning a rental car to a different location, and even pay for transportation necessary to treatment (such as a private car to the airport or doctor’s office). Some cards will even pay for a medical evacuation, if necessary.
Written by Stephanie Colestock
Are there any surprising economic winners?
While companies in the airline and cruise industry are reeling from reduced travel volume, some businesses have actually benefited from the spread of the coronavirus. As would be expected, pharmaceutical companies who are working on a coronavirus vaccine are poised to profit. Several companies including Johnson and Johnson, Gilead, Moderna, and more are racing to develop vaccines and get them through clinical trials. In the long-term, these companies could see dramatic sales increases if they’re able to be one of the first vaccines to market. And, in the short-term, some of these companies have seen their stock prices increase despite the overall drop in the market.
Businesses that create cleaning and/or disinfecting products are also benefiting from the spread of the coronavirus. Demand for hand sanitizer went up by 1,400% from December to January alone! Products like Purell and Germ-X have been selling out both in-store and online. Clorox has enjoyed big stock gains over the past 3 months and 3M says that they’ve increased production and are adding workers and shifts.
An unexpected economic winner during the spread of the coronavirus is in-home products and services. Many employees are being told to work from home or are choosing to do so voluntarily. And this has resulted in an uptick in spending on in-home fitness equipment, video conferencing software, and home entertainment. Zoom Technologies has seen its stock price nearly double since December. And Amazon and Netflix are also expected to benefit as people look for alternatives to brick-and-mortar stores and movie theaters.
Finally, companies that make non-perishable foods, frozen meals, or water bottles are seeing their products fly off the shelves. And Food Navigator recently reported that Bernstein analysts predict that companies like Campbell Soup, Conagra brands, and Kellog are only set to benefit if the coronavirus continues to spread.
Written by Clint Proctor
Clint Proctor is a regular freelance contributor to DoughRoller.net and is the founder of the personal finance website, “Wallet Wise Guy.”