(May 26, 2020, 8 p.m. ET) The new Coronavirus federal aid package, the CARES Act, expands options for distributions from IRAs and qualified retirement plans.
(May 20, 2020, 8 p.m. ET) As mandated by the Coronavirus Aid Relief & Economic Security (CARES) Act on March 27, individuals harmed by the epidemic may make withdrawals from an IRA, 401(k) or 403(b) account before age 59½ without facing the usual 10% federally-imposed early withdrawal penalty.
(May 13, 2020, 4 p.m. ET) During this bleak period in world history, amid the terrible news of death, sickness and financial destruction, there are reasons for hope and promising signs of a U.S. recovery from the Covid-19 pandemic.
(May 5, 2020, 8 p.m. EST) - While the coronavirus pandemic has exacted a once-unimaginable toll in human life, its financial cost is cushioned by an unusual confluence of global conditions shielding Americans from a much-worse economic catastrophe.
(Tuesday, April 28, 8 p.m. EST) The partial shutdown of the economy is captured in these four snapshots of fundamentals in March.
(Wednesday, April 22, 2020) The Coronavirus financial crisis is being compared to the near collapse of the global financial system in 2008 and The Great Depression from 1929 to 1939, but there is one big difference this time: The Fed. The Federal Reserve Bank is using innovative new tools to contain the financial damage of the Coronavirus epidemic.
(Tuesday, April 14, 2020, 8 p.m. EST) - By August 4, 2020, the Institute of Health Metrics and Evaluation (IHME), an independent public health research center at the University of Washington, expected 68,841 deaths from COVID-19 in the U.S.
(Tuesday, April 7, 2020, 8 p.m. EST) -- For business owners who have not yet submitted an application for Paycheck Protection Program (PPP) financial assistance from the U.S. Government, there's good news and bad.
(Thursday, April 1, 2020, 4 p.m. EST) - A cornerstone of the U.S. Government response to the economic crisis caused by the pandemic is the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a history-making $2.2 trillion law that just went into effect. With almost no strings attached, CARES extends financial support to business owners in need under the Paycheck Protection Program (PPP).
(Tuesday, March 24, 2020, 7:30 p.m. EST) The stock market lost about a third of its value before rebounding 9.4% today on news that Congress was closer to an agreement on a $2 trillion economic stimulus package. The coronavirus crisis has reshaped the financial economic landscape and the situation is changing fast. Here are nine financial focal points for your immediate consideration.
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Will Negative Rates Abroad Boost U.S. Stocks?
Negative rates abroad are driving down bond yields in the U.S., which could make the stock market multiple expand. Investing always carries risk, and current financial economic conditions are unprecedented. For the first time in modern history, you have to pay the bank to hold your money in Europe! You have to pay a bond issuer to hold your money. Here's a factual analysis of factors driving what's happening and how it might affect your portfolio.
Here's the simple math formula behind the complex economics altering current financial conditions: The growth rate of a nation's working age population — its labor force — plus its growth in productivity is equal to its economic growth rate, the growth of its total domestic product.
Keeping this fundamental formula of economics in mind, this chart shows that Europe, Japan, and China face a shrinking working-age population in the decades ahead, according to World Bank data. In contrast, the U.S. is about to benefit from the echo boom generation and an expanding labor force.
Because Europe's economy has grown very slowly for the last decade, central banks across the continent have dropped lending rates below zero to stimulate growth.
Bond yields are set in a global market, and low rates in Europe are affecting U.S. investors. Why?
Since Germany is the world's No. 2 issuer of government-guaranteed bonds, negative yields on German Bunds make the higher yield on U.S. bonds relatively more attractive to investors across the globe.
With slow growth in Europe causing negative rates abroad and making U.S. Treasury Bonds relatively more attractive than the German Bund, bonds yields in the U.S were driven. That inverted the yield curve earlier in the U.S.: A 30-day Treasury Bill yielded more than a 10-year U.S. Treasury Bond.
Over the last three economic cycles, negative yield curves have occurred nine times and were followed by recessions three times within 18 months. Still the inversion of the yield curve has frightened U.S. investors into thinking a recession could be on the way, which could end the bull-market fueled expansion now in its eleventh year.
To the contrary, however, current conditions could boost stock values!
No one can predict the next move in the stock market and markets are not always rational, but the lower yields in Europe could continue for many years and make stocks more attractive. Since the labor force and productivity growth are long-term fundamentals of national economies, these conditions are unlikely to change much in the years ahead.
Consequently, U.S. investors facing the low yields on bonds, which are being imported from Europe, may find stocks a more attractive investment than fixed income. That could drive stock prices higher.
The S&P 500, as of September 6th, 2019, traded at a multiple of 16.3 times the consensus forecast by Wall Street analysts for 2020 earnings, according to data from Yardeni Research, Inc. and Thomson Reuters I/B/E/S. However, as investors come to understand the long-term fundamentals depressing yields, they could grow more willing to pay a higher multiple for U.S. stocks.
This article was written by a veteran financial journalist based on data compiled and analyzed by independent economist, Fritz Meyer. While these are sources we believe to be reliable, the information is not intended to be used as financial or tax advice without consulting a professional about your personal situation. Tax laws are subject to change. Indices are unmanaged and not available for direct investment. Investments with higher return potential carry greater risk for loss. No one can predict the future of the stock market or any investment, and past performance is never a guarantee of your future results.
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