I read this entire thread, and it was interesting to see the different perspectives, but also how the emotions of the posters grew gloomier as the market dropped, and happier as it bounced up.
Having lived and invested through the dot.com bubble/burst and subsequent recession of 2000-2001, and the housing bubble/financial crisis/Great Recession of 2007-2009 all that I can say is that time is very different and much, much worse than those events. The market bottom, in my opinion is not even close to being realized yet. We haven't even begun to assess the wreckage of what shutting down our economy will do to our nation, and to our world. We're still in the first phase of this thing, with the government trying to backstop every market from Treasuries to the mortgage market. Massive amounts of money is being doled out to our largest corporations. Stimulus checks to many Americans. Forgivable loans to small business. But I will tell you that the money is not getting to where it needs to go fast enough. Not nearly fast enough.
Most Americans live paycheck to paycheck. 40% of Americans didn't have $400 in the bank for a financial emergency going into this event. Massive, massive numbers of "furloughs" are already happening now....a lot of those furloughs will become permanent layoffs by the summer. Disney announced they're furloughing 200,000 employees on April 19th. They have to. And not all of those Disney employees will be back. A tsunami of defaults and bankruptcies will begin to build by late spring and into and through the summer.
All of these issues will lead to major problems in the markets that trade corporate debt, especially the riskier debt. When we tamp down one type of bubble in our economy, it inevitable pops up somewhere else. Last time it was the sub-prime mortgage market. This time it's risky corporate debt. If that market, and others like it begin to have serious issues functioning (and we're already seeing signs of that), it causes a contagion that can and likely will affect other more stable financial markets. If that occurs, we have another bigger financial crisis on our hands (bigger than 2007-09).
Consumer spending is over 70% of our economy. And consumer confidence is plummeting right now. We aren't just going to bounce out of this event in May, don our new masks and head off to Disney world. Sure, some people will, but many will be cautious due to the virus, but also very cautious to spend money. Many will have taken such a financial hit by then, that they will be focusing on eating and keeping a roof over their heads. Even people with resources will cut back on large purchases because of the stock market and what that does to the "wealth effect".
I really do feel like people need to understand that we're already in a very deep recession and that the damage that has already been done to the world economy means that it's going to be a long one, unlike anything that any of us have experienced. This time is very different and it will be a number of years for things to feel like they did for most Americans in late 2019. That's not so say that life won't go on, it will. But the kind of "Happy Days are here Again" feeling in the economy/stock market are most definitely over for some time. Hang tough everyone.
Having lived and invested through the dot.com bubble/burst and subsequent recession of 2000-2001, and the housing bubble/financial crisis/Great Recession of 2007-2009 all that I can say is that time is very different and much, much worse than those events. The market bottom, in my opinion is not even close to being realized yet. We haven't even begun to assess the wreckage of what shutting down our economy will do to our nation, and to our world. We're still in the first phase of this thing, with the government trying to backstop every market from Treasuries to the mortgage market. Massive amounts of money is being doled out to our largest corporations. Stimulus checks to many Americans. Forgivable loans to small business. But I will tell you that the money is not getting to where it needs to go fast enough. Not nearly fast enough.
Most Americans live paycheck to paycheck. 40% of Americans didn't have $400 in the bank for a financial emergency going into this event. Massive, massive numbers of "furloughs" are already happening now....a lot of those furloughs will become permanent layoffs by the summer. Disney announced they're furloughing 200,000 employees on April 19th. They have to. And not all of those Disney employees will be back. A tsunami of defaults and bankruptcies will begin to build by late spring and into and through the summer.
All of these issues will lead to major problems in the markets that trade corporate debt, especially the riskier debt. When we tamp down one type of bubble in our economy, it inevitable pops up somewhere else. Last time it was the sub-prime mortgage market. This time it's risky corporate debt. If that market, and others like it begin to have serious issues functioning (and we're already seeing signs of that), it causes a contagion that can and likely will affect other more stable financial markets. If that occurs, we have another bigger financial crisis on our hands (bigger than 2007-09).
Consumer spending is over 70% of our economy. And consumer confidence is plummeting right now. We aren't just going to bounce out of this event in May, don our new masks and head off to Disney world. Sure, some people will, but many will be cautious due to the virus, but also very cautious to spend money. Many will have taken such a financial hit by then, that they will be focusing on eating and keeping a roof over their heads. Even people with resources will cut back on large purchases because of the stock market and what that does to the "wealth effect".
I really do feel like people need to understand that we're already in a very deep recession and that the damage that has already been done to the world economy means that it's going to be a long one, unlike anything that any of us have experienced. This time is very different and it will be a number of years for things to feel like they did for most Americans in late 2019. That's not so say that life won't go on, it will. But the kind of "Happy Days are here Again" feeling in the economy/stock market are most definitely over for some time. Hang tough everyone.
