Pandemic jargon explained
Anxiety builds in times of uncertainty. Let’s up your certainty that at least you’re tracking what’s happening. Here are what some key headlines mean for all of us.
On Oct 19, 1987, the stock market fell by 22.6% in one day. Nothing since has come close, even during the 2008 financial crisis. Enter COVID-19. On Mar 16, 2020, the market had its “worst (one day) crash since 1987” (12.9%).
As an investor, the “value” of your investments has theoretically decreased, on paper. Ride it out if you can. Only by selling (if you really need the cash NOW) for cheaper than you bought them do you “lock in” a loss on those investments. After a crash, markets always recover (could take a year or two).
As a non-investor, this is the biggest sale you’ve ever seen of stocks. Do you think Nike or Starbucks’ stock is down only temporarily because all stores are now closed, but in a couple years, they’ll rebound? Time to go shopping for some stocks.
It’s the country’s bank. It has many duties but the one making headlines is the ability to slash interest rates. When the economy melts (like now), the Fed sets interest rates low so that you'll be incentivized to buy stuff (including stocks) and take out loans, rather than hoard your cash in a savings account or under mattresses.
Not a whole lot because the average person like you is looking for medical solutions, not monetary solutions, to get back to normal. For companies though, lower interest rates to borrow could save those struggling, prevent the need for layoffs, and help with an economic recovery.
Battling the economic meltdown comes with a massive price tag - free testing kits for everyone, building testing sites, shoring up medical equipment, helping businesses pay for employees’ sick leave, more money for food stamps, the list goes on. To front this bill – the government is reaching into its pockets to fund it. The specifics are being firmed up by the minute.
An emergency check may be coming your way. Details continue to be negotiated, but you may receive free money if you filed taxes in 2018 and your income was below a threshold ($75K has been discussed). If you’re still collecting a paycheck, there may also be a payroll tax cut (you get to keep more of the dollars usually taken from your paycheck to pay for Social Security).
📉 Bear Market: when the market declines 20% or more over a sustained period — typically two months or more.
FUN FACT: Origin of the symbols is based on how the animals fight their opponents. A bull “raises” its horns in the air while a bear swipes its paws “down”. You can thank us when you win Trivial Pursuit during family quarantine.