Like the movie Groundhog Day, every day now seems to be a repeat of the previous one when it comes to the markets
Bad news followed by bad news followed by more bad news.
Yesterday saw the market drop yet again, this time with the Dow Jones Industrial Average slipping 6.3% to close below 20,000 for the first time since February 2017. The S&P 500 dropped 5.18% and the Nasdaq fell 4.7%.
And while the size of the loss didn’t set any records like previous days, it does mean that the market has officially given up all the gains it has made since President Trump took office.
At one point yesterday the S&P fell by more than 7%, triggering the circuit breakers put in place to prevent extreme losses and halting trading for 15 minutes. This was the second time in three days the markets were halted.
According to data from Yahoo Finance, the Dow has moved more than 1,000 points higher or lower during trading for eight straight days and 11 times over the last month.
Relief may be on the way, as last night President Trump signed the Families First Coronavirus Response Act, a bill that will provide paid leave for people in industries most affected by the coronavirus outbreak as well free testing. as lawmakers and the Trump administration already are looking ahead to other, broader measures that could stimulate the U.S. economy and help workers.
The Trump administration is also working on a more comprehensive stimulus package that could provide up to $1 trillion in relief for Americans and industries like airlines that have been particularly affected by the virus.
The European Central Bank has announced a 750 billion euro ($818 billion) stimulus package to help provide some relief for countries as Europe grapples with the coronavirus as well.
In a statement, ECB President Christine Lagarde said “Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.”
Here in the US, oil had its third-worst day on record, dropping 24.4% and closing at an 18-year low of $20.37 per barrel. Oil is facing both a shortage in demand and an increase in supply.
Stephen Innes, chief market strategist at AxiCorp, said in a note to clients:
“Even if global production remains static over the near term, let alone factoring in Saudi Arabia increased supply, inventories will swell as gas and oil demand drops precipitously in the weeks ahead of when physical storage facilities are filled to the brim around the world.”
He added “In this situation, it’s unclear if a point of equilibrium even fits into this scenario. As once the swift and savage physical rebalancing takes place, the markets could quickly fall to WTI $15 or even further, which is now becoming the base case for some.”
Why You Should Consider Filing For Social Security At Age 62
Earlier this week we discussed four common regrets that retirees have when they look back at their golden years. One of the most common regrets was filing for Social Security benefits at 62, the earliest possible age. According to the Social Security Administration, about 1 out of 3 people apply for benefits at that age.
The regret is that if they had waited longer to file for their benefits, their monthly check would be much larger. For example, by delaying filing for Social Security until age 70, your monthly benefits can be as much as 75% larger than someone who filed at age 62. That’s because benefits grow by a guaranteed 5% to 8% each year that you delay your claim.
But there are always two sides to a coin. Today we wanted to discuss the benefits of filing for Social Security as soon as possible. With this, you can decide which approach you believe will benefit you the most.
The Case For Filing Social Security Early
The earliest you can file for Social Security benefits is age 62, but each month you file before reaching your full retirement age (FRA) cuts your monthly benefit amount. As an example, if your full retirement age is 67 and you start your claim at age 62, your monthly check will be reduced by approximately 30%.
Despite the reduced monthly benefit that comes with filing early, tens of millions of Americans make that decision every year. And it boils down to one line:
We have no idea what the future holds.
The financial benefits of waiting until age 70 to claim Social Security make complete sense. But we don’t know how long we will live, so we don’t know if the trade-off is worth it. If we knew we would live a long, healthy life until age 100, we would all delay filing until age 70 and reap the maximum reward.
But if you decided to wait until age 70 to claim, and unfortunately passed away before that, you would have foregone all the retirement income from age 62 on.
Waiting to file is a gamble, but so is giving up guaranteed monthly income starting at age 62.
Deciding when to claim your benefits requires serious thought and shouldn’t be a hastily made decision. And we aren’t saying that filing Social Security immediately at 62 or waiting until age 70 is the right choice. Every situation is different. If you are still healthy and working, waiting a few years passed 62 to claim but not all the way to 70 might be a good compromise. You’ll get a larger check than had you claimed right away, and your regular working income can make up for some of the reduced benefit amount since you didn’t wait until age 70.
The most important thing, whether you file at 62 or 70, is to find enjoyment in your golden years.
Mnuchin: Next Stimulus Coming By End of Month, No More Extra Unemployment Money
Treasury Secretary Steve Mnuchin said the next stimulus bill will be much more targeted than previous bills. He also said the goal is to get the next bill approved between July 20 and the end of this month. That time is when Congress will return from their holiday break and before they leave for August recess.
On Broad Stimulus Measures
It appears the White House will not support the type of broad stimulus measures of the previous bills. Instead, it will focus on direct payments to Americans. In an interview with CNBC yesterday, Mnuchin said “we do support another round” of stimulus checks to individuals. This mirrors the $1,200 payments that the government sent out as part of the $2 trillion rescue legislation passed in March.
Mnuchin didn’t mention whether he supported the idea of a $40,000 income cap to receive a check that has been floated by GOP lawmakers. The income cap for the first stimulus check was $75,000. He did say that he spoke with Senate Majority Leader Mitch McConnell. He also mentioned the “level and criteria” for checks would be discussed when lawmakers return to Washington.
Any new stimulus bill would likely not include proposals from the Democrats that include hazard pay for essential workers. It likely won’t include a longer extension of strengthened unemployment benefits, mortgage and rent relief, and support for state and local governments, too.
Mnuchin reiterated that the White House isn’t in favor of more relief money for states and municipalities to make up for lost revenue. Some state and local governments are considering trimming essential services as costs balloon and revenues drop. He said the administration does not want to “bail out” states that were “mismanaged” before the virus hit.
On Unemployment Benefits
Another critical topic the lawmakers will tackle the end of the enhanced unemployment benefits on July 30. They will do so when they return to Washington D.C.
Mnuchin said the White House has no interest in extending the enhanced benefits any further. Instead, he said it wants to change how they pay benefits. He did not give details. However, he did hint that unemployed workers shouldn’t be able to earn more money compared to full-time employees
“You can assume that it will be no more than 100%” of a worker’s usual pay, Mnuchin said. This echoes many Republicans who argue the additional benefits are preventing some from returning to work. These workers do this so that they make more at home than they would at their jobs.
While Mnuchin says the White House isn’t in favor of extending unemployment benefits, it is extending the Paycheck Protection Program that provides loans for small businesses. Earlier this week the Trump administration released a list of companies that received loans from the government. With that, backlash ensued as numerous businesses tied to wealthy individuals were found to have requested funds. Of the $130 billion remaining in the program, Mnuchin said he wants new relief to be “much, much more targeted” than past rounds of funding.
Kudlow: Economy Doing Great, Second Shutdown ‘Really Big Mistake’
White House Economic Advisor Larry Kudlow says that the country is squarely in the middle of the “v-shaped” recovery that everyone had hoped for, and despite reports of coronavirus hotspots popping up, shutting down the economy for a second time would make the “solution worse than the disease.”
Kudlow spoke on “Fox and Friends” yesterday and said that the White House is monitoring the jump in new coronavirus cases in states like California, Arizona, Texas and Florida, but added that as a country we now know what works to stop the spread, and just need to work together.
“We know the right mitigation, which has worked, and if we use that wholeheartedly and respect each other, I think we’ll get out of this pretty well and it will not stop the V-shaped recovery.”
On A Second Shutdown
He added that a second shut down would be a “really big mistake.”
“Another shutdown, in itself is controversial,” and would “do more harm than good,” said Kudlow before adding, “It would harm everyone. Not just businesses — the V-shaped recovery would give way. It would harm kids, we saw numbers on depression, drinking and so on… that solution would be worse than the disease.”
Kudlow highlighted the job growth in the last two months, and pointed out that jobs are being added back so quickly, workers are now quitting jobs to search for new, higher-paying ones.
He said there existed a “tremendous burst of jobs in May and June” and “tremendous record hiring rates. People are starting to quit their jobs again, which is extraordinary, in order to shop around for better jobs and wages.”
All those workers looking for jobs should bring down the unemployment rate to as low as 7% iby the end of the year, according to St. Louis Federal Reserve President James Bullard.
That would be quite a rollercoaster ride for the job market, which has swung from a 50-year low unemployment rate of 3.5% earlier this year, to a post-WWII high of 14.7% in April.
U.S. Economy Doing “Very Well”
Appearing on “Closing Bell” yesterday, Bullard said “I think we’re tracking very well right now. Seems to me like by the end of the year you can get down certainly to single digits, probably even below 8%, maybe 7% by the end of the year.”
A surge in new cases could slow the re-hiring of workers across the country, but Bullard believes that wearing a mask will become standard and that will help bring back jobs and boost the economy.
“If we get to that situation, we’ll have the disease under control,” he said. “What I like about that scenario is it does not rely on a vaccine coming or a therapeutic coming. We can use simple, easy technology that we have today, get a good situation, get most of the production back to normal.”
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