Bloomberg recently called what’s happening at the moment the “Great Coronavirus Crash of 2020.” And, while markets have plunged and surged in recent weeks following a glitch in the market last September and recent economic shutdowns in countries all over the world, they note that this crash is a bit different.
While the United States stock market has seen its fair share of crashes, none have been quite like what we’re experiencing right now. Nearly the entire economy has shut down, with businesses forced to close under state-mandated lockdowns to flatten the curve and prevent the spread of coronavirus.
So, what does this mean for the future? Are we headed towards a recession? What is the 2020 stock market outlook now following close to a month of a national state of emergency? We’ve got all the answers for you.
Stock Market Crash 2020
Beginning in September of 2019, the stock market appeared to be in trouble. A glitch ultimately created a repo market, which is when major financial firms trade trillions of dollars of debt for cash in order to keep the market going. So, it’s important to understand that investment companies and individuals investing in stocks were already one edge before coronavirus swept the world.
However, as China shut down and then Italy and Spain followed, people grew rightfully concerned about just how much the virus would affect the United States’ economy. And, in March, it finally happened. The stock market had its worst day since 1987. The Dow Jones fell 2,352 points, down about 10%. And, the S&P 500 and Nasdaq fell 9.5% and 9.4%, respectively.
Analysts pointed out that in the same way that people scrambled to the stores to stock up on toilet paper and other assets, traders and those investing in stocks scrambled to do the same, but with liquid assets on the market. Instead of buying up financial assets, they rushed to buy dollars.
But, what’s the point if we’re headed towards a massive recession? When Claudia Sahm, a former Federal Reserve staff economist who’s now with the Washington Center on Equitable Growth, spoke with Vox about the situation, she noted that what’s really so different about this stock market crash is that there’s so much uncertainty surrounding the situation.
Sahm specifically noted that “When you think about a hurricane hitting the country, it disrupts economic activity, especially where the hurricane hits, but then it gets better. It’s temporary. But the coronavirus isn’t a hurricane. It’s not something that rolls through in a few days and then we start rebuilding. This is a spreading sickness and a potentially months-long disruption.”
Predictions for 2020 Stock Market
As mentioned, there’s a lot of uncertainty surrounding, well, pretty much everything right now. Will real estate investing bounce back and when? Should you buy stocks right now while they’re low? When will life go back to normal? Nobody has answers, not even the government.
So, what’s that mean for the 2020 stock market and the future of our economy? Just yesterday, the S&P 500 was down 21% from recent highs. So, should you buy stocks now to reap the benefits (and cash) in the future? Right now, it might be best to take a look at what we do know and what is on the immediate horizon.
The government is looking to pump more cash into the economy in an effort to offer assistance to those experiencing financial hardships as well as an effort to stimulate the economy. The more cash they’re able to circulate, the more consumer confidence people will have moving forward through the recession.
As for the future of the stock market in 2020, Goldman Sachs recently released data that predicts that the United States GDP will drop by a whopping 24% in Q2. So, keep that in mind. However, you’ll also want to keep in mind some investing tips from Warren Buffet surrounding investing in stocks during a recession.
Investing during downturns often provides higher returns. And, Buffet thinks so too. He mentioned once to try and never time the bottom of a downturn and to never waste a good buying opportunity. “Just like being a net buyer of food,” he said, “I expect to buy food the rest of my life -- and I hope that food goes down in price tomorrow. When stocks go down, we're going to be buying on balance."
Investing in Your Personal Savings
You don’t need an investment calculator to tell you that now is a good time to invest in your own savings. Whether you’ve got money in Tesla stock, Amazon stock, real estate investments or none at all, you’ll do well by readjusting your current budget to plan ahead for the changes the economy is about to go through.
Take a look at our tips on How to Save During a Crisis. Then, think about signing up for the Cheese Debit Card. It’s one of the easiest ways to save a lot, or at least a little, during this pandemic. It requires that you do absolutely nothing aside from signing up. With 0 banking fee, your FDIC-insured Cheese Debit Card can earn you a lot by cashback and saving bonus. Saving money doesn’t get easier than that.
Interested in learning more? Sign up today.