In this 2 Minute Q&A Tuesday, we go over the current pandemic recession. We also go over why the stock market is going up like crazy while the economy is crashing. All this uncertainty can cause a lot of confusion on what to do with your money during this time. To explain what is going on in lamins terms we’re going to go over your top questions regarding the stock market, the economy, and if you should be investing?
Are we in a recession and for how long?
At the beginning of June, the National Beuro of Economic Research (NBER) announced that we’re officially in a recession. As of February 2020, the stats showed the peak of the US economy and the start of the decline. To make this statement, they looked at a few metrics like the countries unemployment, the decline in consumer spending and production. All of these areas were impacted due to the COVID lockdown and little to do with the stock market.
Why the stock market is still rising if the economy is down?
The stock market is booming during the pandemic created a recession due to the massive push of digital companies. The big players involved with keeping the stock market afloat is the FAANG technology stocks. These companies are Facebook, Apple, Amazon, Netflix, and Google. These tech giants have seen an increase in demand and have been able to transition employees to work from home without disturbance. Allowing these tech giants to thrive during the COVID lockdown and being a resource for users during this situation.
Are we in a bear or bull market?
During the COVID pandemic, the stock market has been all over the place. But as of July, we’re seeing a push towards a bullish market after the big dip, bearish market, in March. The sharp dip and recovery of the stock market are called a “V-shape” recovery. Many economists and stock analysts are concerned with the second round of COVID cases that could affect the market. That can lead the stock market dips again and the recovery will be more of a “W-shape”. Meaning that more uncertainty in the market and economy is to come. Due to the dramatic ups and downs, this is why I am considering this to be a Kangaru market instead of a bull or bear market.
Is it a good time to invest?
This is the most popular question for most young investors during this volatile market. Here are my tips to consider before jumping into the market during this wild time.
- Review your monthly budget
- Make sure you can cover your bills and monthly unexpected expenses
- Get ahead on your bills
- *This can be small bills like a cell phone or internet bill
- Fund your emergency fund
- Then push investment efforts to a retirement account
- This can be in a ROTH IRA
These are the tips that my family is doing to make sure we can withstand the pandemic. For more information on how to manage your personal finances during this time, please check out the other relevant content.
- SOP, How to Prepare your Finances for a Recession
- Emergency Fund: What is it and How Much Do I Need?
- How does a Bear Market Affect My Finances?