You really have to forgive those who are trying to be positive, saying the worst is over with this economic mess most of us are facing. It’s a lot easier if you kept your job of course, or were already financially “stable” prior — but reality will smack us in the face soon enough in the coming months.
We have to get it out of our heads that the stock market is a useful indicator of how the overall economy is doing. We know there’s a disconnect because generally wealthier people are the ones dealing with stocks and bonds (i.e., “Investment income”), but I’ve already made the case that we had a weak economy before COVID-19 hit — even though the stock market was on a bull run for over a decade.
Market crashes like the ones we saw in March are just a warning sign to the rest of us that shit’s about to get real — likely with significant economic problems still ahead for the economy.
Kind of like when the water suddenly recedes from the shoreline before a tsunami hits.
Whether the drop in the DOW is the cause, or a symptom of what lies ahead doesn’t matter to most of us — it just means hold on to your assholes.
This has happened many times in history; the market has a sudden dip — because they’re on the bleeding edge of what’s happening in the financial markets in real-time — but for the rest of us, the fallout starts to hit afterward, during which time Wall Street will still have occasional rallies where it’s doing ‘OK’ — believe it or not.
It may not be the best time to ‘buy the dip’ though. (Not financial advice)
The economy will likely become increasingly worse for about 12–18 months before hitting bottom.
We see that Amazon’s stock is up over 20% since January (after a dip), through the stay-at-home measures of the pandemic, and well, obviously some other companies more directly affected suffered a bit. But to me it’s puzzling why Amazon was only up 20% — after all, it would seem like nearly everyone in the world would have ordered something from them at some point during the quarantine measures. If Amazon only had a 20% bump, that seems to me to indicate that lots of people couldn’t afford to order from Amazon — probably because they had just lost their jobs and were already devoid of savings — not to mention figuring out how to pay their damn bills that month.
Speaking of job losses — what a frightening order of magnitude we’re talking about there. You may have read that about 40%* of the recent job layoffs during the pandemic are simply not coming back. History will have to bear this out to be sure, but that figure wouldn’t surprise me; companies are doing more with less through technology already, and they’re always looking for a way to trim their expenses to improve the bottom line. Certainly many businesses discovered during the pandemic that they could get 80% of the work done with just 40% of the employees, for example. Or they finally implemented some technology they’d been dragging their heels on, which now makes them more efficient.
Either way, there are definitely some jobs that are not coming back — either to the people who lost them, or to anyone at all.
The amount of stimulus provided by the government was a nice gesture, but wasn’t enough to help anyone even cover their rent for the most part.
We are seeing a significant delay in things like bankruptcies and missed payments reported, because it seems inhumane to be tallying those up at this point. Trust me, the credit card companies are all keeping track — they just don’t want to catch hell for reporting that stuff yet. They’ll see what’s viable after the dust settles, before those surprises go out in the mail to cardholders. A handful of card companies may be forgiving — but I wouldn’t hold my breath.
Give it another month or two — we’ll start seeing a staggering number of missed payments of various kinds, and within a few months of that, a wave of bankruptcies and business closures that none of us alive today have seen before. There’s just been nothing like this since the Great Depression.
Some people will find work again, but not all; and some will actually give up and try to figure out their own way to do things, and I can’t say I blame them — having been through the meat grinder that is the US job market four times in the last seven years isn’t exactly my idea of fun. In fact, dealing with the job market is one of the most stressful things human beings need to deal with — especially those who haven’t had to go through the job hunting process in over a decade.
A moment of silence for their collective mental health, perhaps.
We may well end up needing something akin to UBI (Universal Basic Income) just on the clear basis that so many people will be in significant financial trouble without enough help through the normal channels. So much that the very credit industry will screw itself over by all the decent credit scores dropping like stones. They can’t make any money if people aren’t creditworthy enough to use their services.
Certainly you can put some stock in places like the payday loan stores, and other somewhat nefarious entities that are a strange mix of helping people in times of need, and extorting them — that market will be doing fine indeed, soon enough.
For what it’s worth, everyone, please hang in there. This is going to be a bumpy ride. I sincerely wish everyone the best of luck. It will be amazing to me, honestly, if there’s not some level of civil unrest — whether in small pockets scattered about, or maybe more — something needs to be done if regular Americans can fall out of the Middle Class so quickly without a realistic ladder to help them climb back up.
*COVID-19 is also a Reallocation Shock — Barrero, Bloom, Davis, Becker Friedman Institute at the University of Chicago
If you enjoyed this writing, you should read my other articles along this vein: