The markets today have been positively influenced by many recent events. Still, there seems to be a dark shadow looming over the economies of the world. Although the stock market has seen an increase so far today, very few doubt that a major recession is on the way.
The Fed Lowers Interest Rates
Yesterday, the Fed lowered its rates by 50 basis points. This means it now has a fed fund rate range of between 1% and 1.25%. When they made that sudden move, which was decided on in an emergency meeting, the stock market briefly rallied. Not long after, they dropped again. So far today, they are recovering and the DOW stands at a gain of 3.35% or 868.35, now at 26,785.76.
It is not certain whether or not this move will have much of a lasting impact. The threat of coronavirus and its overall impact may negate a possible positive move. Fed Chairman Powell did not say that future rate cuts will not occur, so this leaves some hope that another one may come if needed. Many people feel that this indicates the seriousness of what is expected from the coronavirus outbreak in the U.S.
The Political Scene
Last week, there was a big change in politics. All but two candidates dropped out of the race, leaving Bernie Sanders and Joe Biden the only ones standing. Many European nations seemed to be given hope by Biden’s sudden rise, where it was felt globally as various stocks in Europe climbed.
Everyone is watching closely what is happening with coronavirus. We all know that it is slowly spreading, but starting to pick up speed. Cases now are appearing all over the United States and it is soon going to be hitting many communities and cities. It is also now in 83 countries and more than 2,100 new cases having been confirmed so far today.
Lawmakers in the U.S. have completed a deal for emergency coronavirus funding. The designation of $7 billion will encourage the people of this country, knowing that further preparation and funding are being made available for the anticipated widespread outbreak.
With many of China’s businesses not operating and most of the people still have not returned to work, the impact on American businesses will soon start to be felt even more strongly. Businesses here cannot get parts or supplies that are badly needed to manufacture the finished products. Possibly about the time that China gets operational again, coronavirus may have shut down much manufacturing here – extending and increasing the pain of a dropping economy.
Estimates from the United Nations agency UNCTAD has estimated that the overall loss to worldwide manufacturing and trade from coronavirus is about $50 billion – so far. Once this virus spreads over the United States – it is apt to go much higher. The largest impact was felt in the European Union, which experienced an estimated loss of $15.6 billion. The U.S. had the second-largest loss, and Japan continues to have the third-largest loss, leading to Honda and Hyundai’s closing their plants because of a lack of parts from China.
Even if China gets back to work soon, any products brought here may be too late in some parts of the country to do much good. Coronavirus will cause many people and employees to stay at home.