The FED announced its first emergency rate cut since the 2008 financial crisis because of the coronavirus. The great measures the United States is taking in the fight against the spread of the coronavirus economically continue.
As of March 15, there has been another emergency cut. This is the biggest emergency cut in hopes to relieve the markets in U.S. history, in total. Even during the Great Recession of 2008 which jumped the unemployment rate to 10% didn’t require a cut like this.
Not only the U.S. but the Bank of Japan and the Swiss National Bank is also expected to take similar measures against the global economic fallout.
Given that the stock market has declined significantly after the outbreak, this kind of measure should give us ordinary citizens a room to breathe. Another thing that can potentially harm us is the production stop in China as it stopped the retail sales and industrial production in all parts of the county.
Should you invest or cash out? Economic Effects of Coronavirus
The sporting events like the NBA are canceled and travel bans occur from every part of the world. It isn’t hard to imagine that your investments can see a potential decline in a world like this. The stock market correction 2020 already made many investors worry about it. As a good portion of investors is switching to cash, this can be a good opportunity to buy certain stocks.
At this rate of spread, nobody can know everything for sure but the markets are expected to recover in 8 to 10 months. As an investor, you already know where to look and turn your head away.
More than 100 million Europeans are in lockdown. This means there is no transportation and industrial production has stopped for good. Investing in countries that are directly related to lockdowns wouldn’t be the wisest choice at the moment.
The U.S. companies, on the other hand, can recover from the economic decline much faster because of the scale of the impact and the support from the government. After all, the U.S. was heavily built on entrepreneurship. A good example of how we can recover from the economic crisis caused by the coronavirus is by looking at the current unemployment rates.
Pre-Coronavirus Unemployment Rate
Here is a comparison of the current unemployment rates between the U.S. and major European countries.
*The unemployment rates are from pre-coronavirus. It is likely that the rates have risen up significantly.
The Great Recession of 2008 made unemployment rise up to 10% in October 2009. A similar effect on countries like France, Germany, Spain, and Italy would be much severe. So it is always going to be in your best interest to not invest in stocks that have a direct relation with the above countries.