Does the stock market ever have you scratching your head when you see something like the the image below? The news headline is the complete opposite of how the stock market is performing.
On this weeks episode of the podcast I talk about why the stock market behaves the way it does.
You can listen to the episode at agentofwealth.com/44
In this episode I cover:
- Why the stock market sometimes goes up even when the news around unemployment, earnings, and the virus is bad.
- How a stock’s performance is based on it’s projected growth and not it’s current numbers.
- The characteristics of stocks that outperform
- The difference between leading and lagging indicators and which one the stock market is.
- What the coronavirus can teach us about compounding interest, something Albert Einstein called the most powerful force in the world
CARES Act Updates
Stimulus Rebate Checks
The rebate checks started going out this past week. Here is the IRS website on how to track your paymenthttps://www.irs.gov/coronavirus/economic-impact-payments
Paycheck Protection Program (PPP)
There was $350 billion allocated in the CARES Act to the Paycheck Protection Program loans for small businesses. That money is gone and the SBA has stopped accepting new applications. The Treasury has gone back to Congress and asked for another $250 billion. As expected Congress it’s never simple when politics is involved.
Nebraska firms got enough money to cover 82% of the state’s eligible payrolls. It was a different picture in New York and California, where companies did only half as well.
Economic Injury Disaster Loan (EIDL)
The rules on this program changed mid way through the game. Originally businesses were going to be eligible for a $10,000 grant. That changed to $1,000 per employee up to $10,000. And there are delays to receiving the funds.
Access to your 401k via a distribution or Loan
As part of the CARES Act each individual is allowed to either take a distribution or a loan from their 401k in the amount of $100,000 (or the value of their 401k whichever is less). An article from CNBC this weeks highlights that only half of the employers so far have embraced the new rule
If you missed my two articles on the CARES Act stimulus package you can find them here
How much will the $2.5 trillion stimulus package cost each taxpayer.
An article from nj.com calculates it at about $17,000 per taxpayer. Here’s the simple math. There are 146 million adults who file paid at least $1 in tax in 2017 (I was surprised that 44% of Americans don’t pay any tax). If you divide $2.5 trillion by 146 million you get to the $17,000 per taxpayer.
Should you invest in a lump sum or break it up and invest periodically? Investing periodically is a strategy known as dollar cost averaging. In an analysis that covered 1926 through 2015, Vanguard found that an immediate, lump-sum investment outperformed a six-month series of investments 64% of the time. For investments strung out over 36 months, the lump-sum option did better 92% of the time. It reinforces that saying that time in the market is more important than timing the market.
When Will the Economy Open Up?
President Trump unveiled his three phase approach to ending lockdowns and stay at home orders this week. The guidelines are called Opening Up America Again. Before beginning the three-phase process, Trump recommends that the states must meet the following criteria:
- A downward trajectory of influenza-like illnesses and COVID-19 syndromic cases reported within a 14-day period.
- A downward trajectory of documented cases or positive tests as a percent of total tests, within a 14-day period.
- Hospitals are treating patients without crisis care and have a robust testing program in place for at-risk healthcare workers, including emerging antibody testing.
Once states meet these criteria, Trump recommends that they begin the first stage of lifting the lockdown.
Phase one includes most of the current lockdown measures, however large venues such as restaurants, places of worship and sports venues “can operate under strict physical distancing protocols”.
If there is no evidence of a resurgence of the coronavirus, phase two allows non-essential travel to resume. The guidance says schools can reopen and bars can operate “with diminished standing-room occupancy”.
Under phase three, states which are still seeing a downward trend of symptoms and cases can allow “public interactions” with physical distancing and the unrestricted staffing of worksites. Visits to care homes and hospitals can resume and bars can increase their standing room capacity.