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The Impact Of Covid-19 On U.S. Economy And Financial Markets

The Impact Of Covid-19 On U.S. Economy And Financial Markets

This has been a year to remember……. or perhaps, forget. With a raging coronavirus, civil unrest, and rampant political demagoguery, finding the truth has proved challenging. Regardless, there is much we do know and with that, here are some thoughts on what has transpired and what may lie ahead. Specifically, we will discuss the virus known as Covid-19, the economy, and the financial markets.

Covid-19

SARS-CoV-2, the virus that causes Covid-19, is completely new. As such, the learning curve was steep (and still is), which provided an ideal environment for those intent on spreading disinformation. Early on, there were no effective treatments for the virus, which partly accounts for the high death tolls in New York, New Jersey and other northeastern states. There was also a scramble to understand ‘exactly’ how the virus was spread; implement proper safeguards (PPG, masks, etc.); and discover existing drugs that may help. We also needed to understand how the pandemic would affect American workers and which industries would require financial assistance. When the Federal government and the Federal Reserve injected a massive amount of stimulus into the economy thru the C.A.R.E. Act, there was a question of efficiency. More to the point, the federal government hasn’t been the most efficient operation at times. Nonetheless, we can now say that the initial stimulus was highly effective in avoiding a more catastrophic economic result.

During this episode, there has been a tug-o-war between the health of individuals and the health of the economy. Although individuals matter most, the health of many would have suffered had we had fallen into a depression. Nonetheless, this dichotomy exacerbated an already polarized nation with President Trump favoring reopening the economy as soon as possible and democrats being

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Warren Buffett phoned Treasury Secretary Hank Paulson with a stimulus idea when the financial crisis erupted. It may have saved the US economy

Warren Buffett phoned Treasury Secretary Hank Paulson with a stimulus idea when the financial crisis erupted. It may have saved the US economy

warren buffett hank paulson
U.S. Treasury Secretary Henry Paulson (L) shares a laugh with financier Warren Buffett, Chairman and CEO of Berkshire Hathaway, at the Conference on U.S. Capital Market Competitiveness in Washington March 13, 2007.

REUTERS/Jim Young

  • Warren Buffett phoned Treasury Secretary Hank Paulson at the height of the 2008 financial crisis with a suggestion that likely saved the US economy from an even deeper recession.
  • The famed investor and Berkshire Hathaway CEO proposed the government plow capital directly into banks instead of only buying their distressed assets.
  • Paulson quickly gathered the bosses of the nation’s biggest banks and convinced them to accept billions of dollars in investment.
  • The Treasury demanded preferred stock paying chunky dividends, as well as stock warrants in return, emulating Buffett’s bailout of Goldman Sachs in September 2008.
  • Former President George W. Bush called it “probably the greatest financial bailout ever” and said it “probably saved a depression.”
  • Visit Business Insider’s homepage for more stories.

Warren Buffett made a late-night call on Saturday, 11 October 2008 that likely spared the US from an even more devastating financial crisis.

The billionaire investor and Berkshire Hathaway CEO dialed then-Treasury Secretary Hank Paulson, the pair said in “Panic: The Untold Story of the 2008 Financial Crisis,” a documentary released in 2018.

“Hank, this is Warren,” Buffett said. A tired and groggy Paulson’s first thought was, “My mom has a handyman named Warren, why is he calling me?”

Read more: These 30 global stocks are positioned to stay on top in the 4th quarter as the contrast between a recovering economy and rising COVID cases keeps markets volatile, RBC says

Buffett was calling about the Troubled Asset Relief Program (TARP), which authorized the Treasury to spend $700 billion purchasing distressed assets from banks. Lawmakers passed it in a desperate effort to

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Even as the Economy Grew, More Children Lost Health Insurance

Even as the Economy Grew, More Children Lost Health Insurance

The share of children with health coverage in the United States fell for the third consecutive year in 2019, according to census data, after decades of increases.

The decline occurred during a period of economic growth — before the coronavirus pandemic caused broad job losses that might have cost many more Americans their health insurance.

A report Friday by the Georgetown Center for Children and Families found that the ranks of uninsured children grew the most in Texas and Florida, and that Latino children were disproportionately affected. Nationally, the number of children without health insurance rose by 320,000 last year alone, to a total of nearly 4.4 million children, the report found.

“What’s so troubling about this data is we were making so much progress as a country,” said Joan Alker, the center’s executive director and an author of the report. “And now that progress is clearly reversing.”

The picture since the start of the pandemic is less clear. Many families have lost jobs that came with health coverage, which could increase the number of children without insurance. But national enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) has also swelled, aided by temporary policies to prevent families from losing coverage during the emergency. More current estimates for the uninsured rates among children will take time.

In recent years, falling enrollment in Medicaid and CHIP drove the overall changes, according to the report. Although those programs for low- and middle-income children are primarily managed by state governments, Trump administration policies could be playing a role: The administration has encouraged states to check eligibility more often, which advocacy groups say has caused many families to lose coverage because of paperwork errors and missed deadlines.

And the administration’s policies on immigrant families have caused some to end enrollment for their

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Why Is The Market So Strong And Economy So Weak?

Why Is The Market So Strong And Economy So Weak?

The continuing strength of the stock market, even as the coronavirus pandemic batters the U.S. economy, has baffled many investors. The Dow Jones Industrial Index fell some 35% in 20 trading days the first three weeks of March as COVID-19 began spreading rapidly globally, but it has since gained nearly 60% to levels above 28,650. At the same time, the Commerce Department reported the U.S. economy shrank 31.7% in the April-June quarter. Part of our job at Equitas is to research many areas of the market and the economy, analyze the current environment, and to search for the investment opportunities. While there are numerous views and theories, in this KnowRisk Report we explore and expand on why the stock market is so strong, while the economy is so weak. We start with Wharton finance professor Itay Goldstein who has boiled it down into two reasons: the long-term prospective of the stock market, and the unprecedented cash infusion of the Federal Reserve. 

The First Reason

Goldstein says at all points in time “the stock market is meant to be forward-looking,” Indeed stocks have risen during seven of the past 12 recessions going back to World War II. “In general, the stock market is a bit different from the economy, in the sense that what you see right now in the economy is what is going on right now” such as production, employment and so forth, he noted. Even in “normal times,” stock prices and economic output would not move in tandem, according to Goldstein. In fact, we may have situations “where the stock prices may predict something that is going to be different from what we see right now.” The S&P 500, for instance, is driven more by manufacturing, while U.S. gross domestic product, the broadest measure of goods and services

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Jerome Powell, Fed Chair, Says Economy Has ‘a Long Way to Go’ as Trump Calls Off Stimulus Talks

Jerome Powell, Fed Chair, Says Economy Has ‘a Long Way to Go’ as Trump Calls Off Stimulus Talks

In deciding to forgo any more immediate relief, the president could be setting the economy up for the type of painful outcome that Mr. Powell warned of on Tuesday. The Fed chair, who has increasingly called for more government help, said policymakers should err on the side of injecting too much money into the economy rather than too little given how much work remains.

“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Mr. Powell said in remarks before the National Association for Business Economics.

“Over time, household insolvencies and business bankruptcies would rise, harming the productive capacity of the economy and holding back wage growth,” he said. “By contrast, the risks of overdoing it seem, for now, to be smaller.”

In multiple tweets later Tuesday night, Mr. Trump appeared to backtrack his assertion that an agreement would wait until after Nov. 3, at one point urging both chambers to “IMMEDIATELY Approve” reviving a lapsed loan program for small businesses, funds to prevent airlines from furloughing or laying off workers and another round of stimulus checks. It remained unclear if his tweets, which came after stocks plummeted, reflected a willingness to restart negotiations with Ms. Pelosi. Both provisions have bipartisan support, but several lawmakers have pushed for them to be included in a broader package.

Nearly seven months into the pandemic, millions of Americans remain unemployed as the coronavirus keeps many service industries operating below capacity. The unemployment rate has fallen more rapidly than many economists expected, dropping to 7.9 percent in September, and consumer spending is holding up. But the economy’s resilience owes substantially to strong government assistance that has been provided to households and businesses.

That included direct payments to families, forgivable loans to small businesses and an extra $600 per

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