Fourth Point Wealth

The $2 Trillion Economic Stimulus Bill Has Passed: Here's an Overview

Tue, 31 Mar 2020 06:55:00 GMT

On March 27, 2020, the White House and Congress came to an agreement and passed the largest relief package in recent United States history, called the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Spreading $2 trillion amongst businesses, hospitals, families and individuals, this economic stimulus package is designed to bring relief to those experiencing the ever-increasing threat of economic turmoil and downturn amidst the COVID-19 pandemic.

After six days of back and forth between Senate Republicans, Democrats and the White House, all parties came to an agreement on this historical $2 trillion package. For perspective, this relief package greatly surpasses the $168 billion offered to Americans in the Economic Stimulus Act of 2008, which was the last time an economic stimulus package was passed.1

If you’re wondering how this newly passed act may affect you, your place of employment or your local healthcare facility, we’ve gathered up the important numbers to know in this overview.

Unemployment Benefits

In an effort to extend unemployment benefits, eligible Americans on unemployment will receive an additional $600 per week for four months.2 This is done in an effort to help those who are currently out of work due to the COVID-19 pandemic better achieve their full pay over the next four months.

This bill will allow unemployed individuals affected by the pandemic to receive unemployment insurance for an extended 13 weeks. In addition, it will allow out-of-work individuals to receive the enhanced unemployment benefits as outlined in this bill for four months.2

The bill has called for the creation of a pandemic unemployment assistant program that would offer unemployment benefits to those who have previously not been eligible - including those who have been furloughed by their employer, freelancers and gig workers (such as Uber or Lyft drivers).

Healthcare Aid

In the final iteration of the bill, hospitals will receive around $117 billion in aid.2 In regards to helping healthcare workers on the frontline of the COVID-19 pandemic, the bill is meant to help workers gain better access to protective equipment, testing supplies and provide construction or facilities to house the growing number of patients in need.

Additionally, hospitals and healthcare providers will see a 20 percent increase in Medicare payments for treating those on Medicare with coronavirus.2

Stimulus Checks

Some American taxpayers will be receiving direct stimulus payments of $1,200 as part of the new bill. Those with incomes up to $75,000 will receive the full $1,200, with the amount lowering and eventually phasing out for those who earn more than $99,000. Individuals earning $99,000 or couples earning $198,000 or more will not receive checks. Families who qualify with children can expect to receive an additional $500 in direct payments per child.2

To determine how much you will receive, the government will be basing your income level on your 2018 tax return, unless you have already filed your 2019 tax return.2 As a reminder, the tax filing deadline has been extended to July 15, 2020.2

Small Business Grants & Loans

A large portion of this stimulus bill will be going toward assisting small businesses who have been affected greatly by the COVID-19 pandemic. Overall, $500 billion will go toward assisting businesses and corporations, with $29 billion going to the aviation industry and $17 billion to businesses that work in national security. The remaining $454 billion can be leveraged as loans for other businesses or municipalities. Companies that choose to take this government assistance must agree to stop any stock buybacks for the length of the loan plus a year. In addition, these companies must retain at least 90 percent of their employee levels between March 24 and September 30, 2020.2

This money will be overseen by an inspector general and a five-person panel, who Congress will appoint. In addition, any businesses run or partially run (at least 20 percent stake in the company) by the Trump family, or other senior government officials, will not be eligible to use these funds.2

Education

Millions of educators and students from K-12 through college have been affected by government orders to self-isolate. In an effort to assist school systems and institutions across the country, the government is granting $30 billion in emergency education funding.2

In addition, The Department of Education will be suspending payments so that borrowers would be allowed to put off paying their federal student loan payments without penalty until September 30th.2

Airlines

Airlines have been hit hard during the pandemic and requested government assistance to help negate the crippling effects they’ve endured as a result. The relief bill will provide $32 billion in the form of grants to cover the wages and benefits of aviation employees.2

Here's how the $32 billion will be broken down within the aviation industry:

$25 billion for passenger airlines

$4 billion for cargo airlines

$3 billion for contractors (workers who handle ticketing, cleaning, catering, baggage, etc.)2

Passenger airlines and cargo airlines will also receive additional help, $25 billion and $4 billion respectively, via loans or loan guarantees.2

In exchange for this assistance, the government has banned airlines receiving assistance from furloughing employees, making pay cuts, buying back stocks or issuing dividends to investors through September.2

Local Government

State and local governments haven’t been immune to the financial hardships this global pandemic has caused. The stimulus package is offering $150 billion for state and local governments that have been working to combat the effects of COVID-19 in their communities.2

Food Assistance Programs

Anticipating a rise in demand for food banks as a result of the increasing unemployment rate, the bill has provided the Emergency Food Assistance Program with $450 million. Approximately $350 million would go toward purchasing food, with the remaining $100 million spent on the distribution of food to those in need. In addition, Puerto Rico and other U.S. territories will receive $200 million for food assistance, and American Indian reservations will receive $100 million for food distribution.2

While the news seems to be changing every day surrounding COVID-19 in America, this stimulus act is coming at a time when families and business owners alike are fearful of their financial future. If you still have questions about how this stimulus package may affect you or your business, you’ll want to get in touch with your financial advisor. Together, you can sort through expectations of what’s to come and the right next steps to take.

https://www.congress.gov/bill/110th-congress/house-bill/5140/text

https://www.congress.gov/bill/116th-congress/senate-bill/3548/text

The Economic Impact of Pandemics

Fri, 20 Mar 2020 15:24:00 GMT

Pandemics, as rare as they are, have made their mark in history - not only in numbers of lives claimed but in the economic impact felt around the globe. As we’re all facing the market downturn and recent financial volatility caused by the spread of COVID-19, it’s useful to look back at how the economy responded to pandemics in the past, giving us a glimpse of what we might expect to happen in the future.

Previous Global Pandemics

101 years before the COVID-19 outbreak began in China, another pandemic swept the globe: the 1918 influenza. Nicknamed the "Spanish flu" because it was first mentioned in Spanish newspapers, this pandemic surpassed the death toll of World War I, taking the lives of nearly 50 million people during its two-year run.1 The Black Death is the only widespread illness in recorded history to take more lives than the Spanish flu, approximately 60 million people, in a similar timespan.2

For some further perspective on the severity of the 1918 influenza, we can look back 10 years ago, before the current outbreak of COVID-19, at the 2009 H1N1 flu, which spread rapidly across the globe and claimed the lives of up to 395,000 people.1

Because the Spanish flu was one of the deadliest and most widespread pandemics in recent history, researchers have often turned to it to gain potential insight into the costs and consequences of future global pandemics, such as COVID-19.

For example, based on what we've learned from past flu pandemics, the World Health Organization estimates that a future flu pandemic would cost the United States $60 billion per year. In comparison, the WHO predicts pandemic preparedness may cost only $4.5 billion per year.1

How Pandemics Affect the Economy

Similar to what’s happening now in Europe and across America amidst the COVID-19 outbreak, large cities and populated areas essentially shut-down during the Spanish flu. Anything from sporting events and businesses to private events, including funerals, were discouraged or banned in an effort to reduce the spread of the virus.2 As a result of the widespread nature of this pandemic, countries experienced labor shortages and increased use of government social security systems.3

Because this outbreak happened in concurrence with the end of World War I, concrete figures regarding the exact economic impact of the flu are scarce. The long-term effects of a pandemic on the economy, however, are indisputable. When told to stay inside, people are unable to patronize local restaurants and stores. With no customers and government orders to close, businesses are unable to turn a profit and many may close for good. With businesses shutting down or downsizing their workforce, unemployment rates start to rise. And without a job, individuals don’t have the additional income to patronize the businesses that remain open and operating.

One person’s spending is another person’s income. That, in a single sentence, is what the $87 trillion global economy is. This relationship, between spending and income, consumption and production, is the core of how a capitalist economy functions.

What is so deeply troubling about the potential economic ripple effects of the COVID-19 virus is that it requires this perpetual motion machine to come to a near-complete stop across large chunks of the global economy, and for how long, no one is sure.

We’re watching this economic cycle happen firsthand. With manufacturing slowing down and profits dropping, investors and consumers are losing confidence in the market. A global pandemic of this magnitude acts, essentially, as a shock to the financial system.

With uncertainty surrounding the economic stability of our country, it’s okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to us (or whoever your trusted advisor might be) and discuss your options. It is easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head.

https://www.who.int/influenza/spotlight

https://www.stlouisfed.org/~/media/files/pdfs/community-development/research-reports/pandemic_flu_report.pdf

https://theconversation.com/coronavirus-and-spanish-flu-economic-lessons-to-learn-from-the-last-truly-global-pandemic-133176

Staying the Course – Coronavirus and Stock Market Volatility

Mon, 09 Mar 2020 15:23:00 GMT

According to the CDC,1 the recent coronavirus (COVID-19) outbreak has claimed almost 5,000 lives and impacted nearly 132,000 people worldwide as of March 12th, 2020 and it has also injected a sense of uncertainty into the markets. If you’re invested in the stock market you may have found yourself sitting on the edge of your seat over the last few weeks as we watch market volatility increase.

We are here for you and we want to take a moment to update you on our thoughts related to the coronavirus, its impact on the financial markets, and, ultimately, on your personal financial situation.

A Brief History Lesson

The market’s negative response to health crises is nothing new. The below table shows that since 2003, approximately six months after early reports of a major outbreak, the S&P 500 bounced back by an average of 10.47 percent. After 12 months, it rebounded by an average of 17.17 percent.

Why is it important to take a look back in time? While there are no guarantees the current situation with COVID-19 will follow a similar pattern to the above epidemics, it helps us to better understand and put into perspective that historically over long periods of time, despite an epidemic, stocks typically regain their upward trajectory.

Market Psychology

As we explored above, all assets rise and fall in value and the more extreme the swing, the stronger the sentiment. Overcoming this market psychology is no easy feat but learning how the market works can help to reduce stress and increase your ability to “stay the course."

Your investments are designed to support your long-term objectives, not today’s needs. In situations like this, it is important to have perspective and remember that swift market drops are not unusual. Of course, the headlines are scary and fear of the unknown is scariest of all, but the nature of the market is that it will go up and down. That is just par for the course.

When you think about it, our emotions share a similar reaction between excitement and depression. Surges of pleasure with favorable uptrends and neurotic negatives with declines. Unfortunately, emotions can be drivers for selling early thus diminishing significant gains that can occur over the long-term.

We believe the best response is to acknowledge what you’re feeling, reach out to us if that would be helpful, and have confidence that we are on top of the situation. And always keep in mind that in the short term, market movements can be heavily influenced by headlines and computerized trading, but in the long term, markets tend to reflect broader-based economic trends. One of our most important roles as your trusted advisor is to not let the difficulties of the short term prevent the reaping of potential benefits of sound, long-term investing.

What Should You Do?

The answer is simple: Don’t panic.

Sure, fear is a natural emotion to encounter during turbulent times especially when a health epidemic hits like a virus that can impact both your health and your finances. When market corrections occur (classified as a drop of 10 percent or more in one of the major U.S. stock indexes) the media tends to add fuel to the fire. It’s important not to make any alarm-induced moves during a correction. Instead, stay vigilant and stay the course.

Acknowledge that the market is not just about winning and losing – it’s about strategy and duration. The virus and how it spreads is completely out of our control, but our reaction to the financial markets is something we can control. It’s not fun seeing your portfolio drop, But at the same time, we know market volatility is normal and expected. The key is to “zoom-out” and look at the long-term big picture.

What We’re Doing

What we do know for a fact is that the market will continue to do three things: It will sometimes go up, it will sometimes go down, and sometimes it will barely budge. The other absolute certainty? Your financial well-being is our number one objective.

Our team is burning the midnight oil to monitor the situation as it unfolds and recommending actions as appropriate.

And we will leave you with one final piece of good news: sometimes, situations like this can actually create opportunities. For example, as prices drop, we will also seek out any opportunities to “rebalance” and shift your asset allocation if it aligns with your long-term goals.

If you have any questions about your specific situation, please contact us. We are here to help and we are here for you. Thank you for your continued trust and confidence.

https://www.cdc.gov/coronavirus/2019-ncov/cases-in-us.html