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Finance News Roundup (March 2020)

April 4, 2020 Steve Wonsiewicz

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Congress-Approved CARES Act Allocates $2 Trillion To Aid Economy

In case you missed it, on March 27 Congress passed the largest economic relief bill in history, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which will allocate $2.2 trillion to support individuals and businesses affected by the COVID-19 pandemic. The far-reaching law contains multiple provisions designed to keep the U.S. economy afloat.

Here are a few highlights:

  • Direct payments to individuals:Taxpayers will receive a maximum one-time payment of $1,200, while married couples will receive $2,400, plus an extra $500 per child. Payments are based on adjusted gross income as filed with the IRS ($75,000 for individuals and $150,000 for married couples). Smaller payments will be sent to individuals making up to $99,000 a year and married couples earning up to $198,000.
  • Unemployment payments: The Act allocates $250 billion for extended unemployment payments, for which the rules on eligibility have been expanded and the amount paid per person has been increased by $600 per week for four months (excluding what state programs pay).
  • Small business support: $350 billion has been allocated to fund loans to companies with 500 employees or fewer employees. Eligible businesses can receive funds to cover eight weeks of payroll. Borrowers will be charged a mere 0.5 percent interest rate and the loans will be forgiven if employees are kept on the payroll for two months from the date the payroll protection loan is effective.
  • Large corporations support: $500 billion has been allocated to loans, loan guarantees and other investments in large companies. The loans mature in five years and, unlike those to small businesses, will not be forgiven.

 

The Federal Reserve Bank Unveils New Initiatives

The Federal Reserve has continued to pull out all the stops to support the economy during the COVID-19 pandemic. The Fed announced multiple initiatives on March 23, saying in a written statement that “aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.” New Fed programs will increase purchases of Treasuries, mortgage-back securities and corporate bonds. It also will allow purchases of exchange traded funds of the first time in the agency’s history.

In an interview with CNBC, former Fed Chairman Ben Bernanke said, “The Fed has been extremely proactive and Jay Powell and his team have been working really hard and got ahead of this … [they] have shown that they can set up a whole bunch of diverse programs that can help us keep the economy functioning during the shutdown period so that when the all-clear is sounded … we’ll see a much better rebound than we otherwise would.”

 

U.S. Markets Suffer Record-Breaking Drop During Second Quarter

U.S. stock prices took a beating during the first quarter as investors sold equities due to concerns about the COVID-19 crisis, ending the longest bull market in U.S. history. The Dow Jones Industrial Average had its worst quarter since the Great Crash of October 1987, falling 23 percent. The S&P 500 had its worst quarter since the Great Recession in 2008, dropping 20 percent. It was the fastest decline from an all-time high to a bear market (defined as a 20 percent drop in prices) in the history of the stock market. Nine of the 11 sectors in the S&P 500 fell at least 20 percent below their 52-week high, with only health care and staples staying out of bear market territory.

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