Is the Stock Market the Coronavirus’ Latest Victim?
March 11, 2020
- Why the rest of the economy fundamentals are more important than short term fears
- What’s going on underneath the coronavirus scare?
- Why is the stock market freaking out?
Is the coronavirus scare really as “dumb” as Elon Musk thinks it is?
Paychecks everywhere watched the stock market have its worst week since the start of the 2008 recession thanks to fears (or what some would call unnecessary chaos) over the coronavirus spreading in the US. But before your Paycheck goes into a panic, it’s important to understand the stark difference between a short term reaction to outside forces vs. the underlying fundamentals that make the US economy so strong right now.
Maybe Elon Musk is on to something…
Why the fundamentals matter
The stock market will virtually always go up over the long term (these are their words, not ours), because short term concerns like coronavirus come and go – but the fundamental aspects of the economy have always won out in the end.
What are the fundamentals of an economy? They include job growth, wage growth, productivity, unemployment rate… just to name a few of the key indicators we can use to understand the actual health of our economy.
So let’s all put on our big boy/girl Paycheck pants, take a look at how the fundamentals of our own economy are doing, and all calm the h*** down.
There’s a ton of new jobs and [still] low unemployment
The U.S. economy added another 273,000 jobs in February. By the way, that was nearly 100,000 more than what experts were estimating. Health care added the most at 57,000 jobs, food services added 53,000, construction added 42,000, and to top it off – unemployment decreased by 105,000.
January’s job growth was already the largest gain for a single month since May 2018, and February tied January to keep the record going strong.
There’s actual wage growth
It isn’t just the number of jobs that are growing; the amount those jobs pay is growing too. Average hourly earnings grew 3 percent last year, and the average number of hours people work each week also increased to 34.4 hours.
There’s a lot of strength in our economy
- More jobs.
- More wage growth.
- More hours worked.
- Even more productivity.
In sum, the jobs market is still very strong. New jobs are being added, wages are growing, unemployment remains low, and don’t forget that we just recently signed a new trade deal with Mexico and Canada, AND part one of a trade deal with China.
The fundamentals of the US economy are doing just fine. But sometimes, something comes along to knock the train off its course.
Then came the coronavirus…
Make no mistake about it, the only reason the economy seems to be slowing down is because the coronavirus is forcing it to. Airlines are losing money on flight cancellation fees and less international flights, some companies are telling people to stay at home to avoid getting sick, large concerts and conferences are getting canceled, people are avoiding cruises, and it’s all hurting profits across the board.
According to Reuters, “financial markets view the virus, which causes a flu-like illness, as the catalyst that could interrupt the longest economic expansion on record.”
We’ll get through it
There are a lot of factors that weigh on the market, and as Forbes writes, “the media, the opinions of well-known investors, natural disasters, political and social unrest, risk, supply and demand, and the lack of or abundance of suitable alternatives” are all things that could make the stock market go up or down.
We know the stock market doesn’t like uncertainty, and we know we’re in pretty uncertain times right now thanks to the coronavirus. But, we also know the economy is still adding jobs, wages are still growing, productivity is still increasing, and unemployment is still going down.
And time has shown that wars come and go. Natural disasters come and go. Presidents come and go. And, yep, you guessed it: viruses come and go, too.
You can always count on us to help you and your Paycheck get through times of uncertainty. Sign up for our newsletter to make sense of the coronavirus and its impact on our economy