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U.S. Stocks Have Their Worst Week Since the Financial Crisis

It was another historic week for financial markets with volatility reaching levels not seen since the Great Depression. The magnitude of the impact of the coronavirus is still widely unknown and things are changing by the minute. Drastic measures are being taken throughout the nation, requiring people to shelter in place in an effort to “flatten the curve”. Financial markets are feeling the pain with U.S. and equities down over 30% from highs in just one month’s time and down 15% this week alone. Credit spreads have widened dramatically in the bond market, with all risk assets selling off. U.S. Treasury bonds have been one of the few safe havens, although liquidity strains are bubbling up, testing the stability of financial markets. As a result, policy makers are scrambling to pass both fiscal and monetary policy measures meant to help soften the blow to individuals and businesses as well as maintain confidence in the stability of financial markets.

Weekly Returns

S&P 500: 2304.92 (-14.98%)
FTSE All-World ex-US (VEU): (-12.14%)
US 10 Year Treasury Yield: 0.92 (-0.02)
Gold: $1,498.29 (-1.98%)
EUR/USD: 1.0695 (-3.70%)

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Major Events

  • Monday – The Federal Reserve announced an emergency rate cute that dropped the benchmark interest rate to zero and a new quantitative easing program of $700 billion.
  • Tuesday – The Fed announced plans to help business get up to $1 trillion in critical short-term funding that businesses use to operate.
  • Tuesday – Amazon said they plan to hire 100,000 warehouse and delivery workers to help meet demand as well as increase pay for these workers by $2 an hour.
  • Wednesday – U.S. oil prices dropped another 24% down to $20 a barrel; the lowest level since 2002.
  • Thursday – U.S. oil prices notched the largest single day gain on record, spiking 24% after the Energy Department requested to buy 30 million barrels for the Strategic Petroleum Reserve.
  • Thursday – California Governor Gavin Newsom ordered “all individuals living in the State of California to stay home or at their place of residence” until further notice to slow the spread of the virus.
  • Friday – Secretary Treasury Steven Mnuchin tweeted Friday that the tax deadline for filing and payment has been moved to July 15th for all taxpayers and businesses.

Our Take: What to Know About New Fiscal Policy Amid the Coronavirus Pandemic

With the amount of information coming out daily and the extreme levels of volatility in markets, it’s hard to keep up with the most relevant and latest information. Below is a summary to get you up to speed on what’s been happening this week on the fiscal front.

Fiscal Policy Updates:

Congress hopes to have an economic rescue package of over $1 trillion ready for a vote by Monday. Democrats and Republicans are negotiating the plan in an emergency meeting today and know they need to act fast. The plan focuses on households, businesses and the healthcare industry.
Here are some of the details being discussed:

Individuals

  • One-time cash stipends of $1,200 for individuals, $2,400 for couples, and $500 payments for each child — phased out at income thresholds of $75,000 for individuals and $150,000 per couple
  • Penalty-free withdrawals of up to $100,000 from 401ks
  • Looser restrictions on charitable giving

Businesses

  • $208 billion in loans for companies in distressed industries with some caveats for use, and $50 billion of it would be for airlines
  • $300 billion for small businesses in loans potentially forgiven if used toward payroll expenses
  • Deferral of the 6.2% employer payroll tax for businesses easing of restrictions for deductions
  • Potential participation in gains for the Treasury secretary of companies taking financial aid

Healthcare

  • Permanent liability protection for the manufacturers of respirators and other important medical devices related to the pandemic
  • Commitment from insurers that coronavirus tests will be cost-free to policy holders
  • Coverage of coronavirus vaccines as a preventive service and free to patients
  • Establish a new Medicare payment for treating COVID-19 patients
  • Suspension of a 2% Medicare payment cut to providers through the end of the year

This information was gathered from The Associated Press and can be found here.

Other Recent Items

  • Trump recently signed into law a $100 billion-plus bill to boost testing for the coronavirus and guarantee paid sick leave after previously signing an initial $8.3 billion package from Congress.
  • The deadline for paying and filing taxes has moved to July 15. This applies to all taxpayers and businesses and means you now have an additional 90 days to file and make payments without incurring interest or penalties. If you expect a tax refund, we recommend you still file sooner rather than later.

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The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Lacey Cobb, CFA, CFP®
Lacey Cobb serves as the Director of Advice Solutions at Personal Capital. She has 10 years of financial industry experience, with a background in portfolio management, trading, research, investment analysis, and financial planning. Prior to Personal Capital, she was the Head of Trading and Research at Polaris Greystone Financial Group, where she managed the portfolio management team and served on the investment committee. She started there as a financial planner and helped grow AUM from $250 million to $1.5 billion. Before that, she worked for State Street as a fund accountant. Lacey graduated from the University of California, Davis, and holds both the Chartered Financial Analyst® designation and Certified Financial Planner™ designation.
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