The Financial Markets and the Coronavirus

Introduction

The Coronavirus is a pandemic that has swept the globe, causing widespread panic and financial instability. The virus originated in China and quickly spread to other countries, resulting in a significant death toll. Hospitals have been overwhelmed with patients and governments have implemented strict measures to contain the virus. The pandemic has also caused severe damage to the global economy, with stock markets plunging and businesses shutting down. Markets recovered and soared to new highs, however, as central banks around the world intervened with trillions in new liquidity. Now, interest rates are rising to combat soaring inflation, and the situation is still very much evolving. It remains to be seen how the world and financial markets will recover from this crisis.

Impact on the Economy & Stock Market

The Coronavirus pandemic has had a profound impact on the economy and stock market. The S&P 500 index, which is a gauge for the overall stock market, fell by over 30% when the pandemic began. Unemployment in the United States rose to over 10%, and GDP contracted by 3% in 2020. These impacts were felt across the globe, with economies in Europe and Asia also experiencing significant slowdown. 2020 was a rollercoaster year for the stock market, with the S&P 500 reaching an all-time high in February 18, 2020 before beginning its plunge the following week and through the first three weeks of March as the COVID-19 pandemic took hold (Yahoo! Finance, 2022). The market then regained some ground in April and May before consolidating in June and then again at a higher level from September to November. The market then broke out November 5, 2020, and rallied strongly through the end of the year, helped by news of promising vaccine trials and prospects for more fiscal stimulus from the incoming Biden administration. In total, the S&P 500 finished 2020 at its (then) all-time high, up nearly 60% from its pandemic lows reached on March 23, 2020. The recovery was v-shaped and quite rapid. As of today (September 26, 2022), the S&P 500 is at 3665, below where it ended in 2020 but still above its Feb 18, 2020 peak of 3385, having significantly sold off in 2022 due to a combination of the Fed Funds Rate rising and quantitative tightening beginning.

Unemployment spiked dramatically in 2020, from 3.5% in January to 14.7% in April 2020 (BLS, 2022). It peaked that same month and fell over the rest of the year to 6.7% by November-December 2020 (BLS, 2022). The low was 3.5% in Jan-Feb 2020, and the high was14.7% in Apr 2020 (BLS, 2022). Current unemployment according to the most recent survey from the BLS (2022) on Sept 26, 2022, is 3.7%--so roughly back to where it was before the lockdowns of 2020. The pandemic...

…Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provided $2 trillion in relief funding for individuals, businesses, and state and local governments (Deloitte, 2020). The CARES Act also included provisions for expanded unemployment benefits and direct payments to households. These and other recovery programslike the bailout of the aviation industry (Sider & Davidson, 2020)have helped to stabilize the economy in the face of unprecedented challenges, and have laid the foundation for a strong recovery in the months and years ahead.

The pros and cons are complicated when discussing these actions. The PPP has come under fire from some critics who argue that it is a bailout for large corporations, while others argue that it is necessary to prevent mass layoffs during the pandemic. The aviation industry has also been hard hit by the pandemic, and the CARES Act includes a $25 billion bailout for airlines. This bailout has been criticized by some who argue that it is unfair to bail out an industry that has been struggling for years, while others argue that the aviation industry is critical to the economy and should be supported during this time of crisis. The CARES Act is the largest economic stimulus package in U.S. history and is putting heaps of debt on the USa con, but its relief measures for businesses and individuals impacted by the coronavirus pandemic were necessarya pro.

The Federal Reserves Response

The Federal Reserve and…