How Coronavirus Is Affecting Your Bottom Line

The article below was written by The Water Coolest’s editorial team. The Water Coolest is a daily business news and professional advice email newsletter … with a hearty helping of unfiltered commentary (see below).

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In case you’ve been living in a bubble (since you’re probably stuck at home anyway, it might make sense to watch the Seinfeld Bubble Boy episode) in just a few weeks coronavirus has gone from a meme-worthy news story that fell into the “sounds like someone elses problem” category to a pandemic that has reached the shores of America.

In the words of Pete Campbell … “Not great, Bob.

But assuming you don’t die from coronavirus, which sounds pretty awful if we’re being totally honest, you aren’t exactly in the clear.

You see, the virus is disrupting global trade, which in turn disrupts the global economy. And assuming you’ve got approximately 4-figures of net worth, you’re likely to feel the financial pinch.

The stock market

Over the last week, US markets have been more unhinged than your ex when she forgot to take her meds. Last week marked the worst week for the stock market since the financial crisis. Don’t believe me? The Dow plunged more than 12%, the S&P 500 lost 11.5%, and the Nasdaq dropped 10.5%. Then yesterday the Dow rocketed 5.1%, the S&P 500 jumped 4.6%, and the Nasdaq Composite rose 4.5%. Go home markets, you’re drunk.

And how does this affect you? Welp, go check your 401k or IRA. Chances are that your balance is much lower than it was in a pre-coronavirus world. Ahh, the good old days.

If you’re a more active trader (you know, the guy with 6-monitors and the word “hustler” in his IG profile … who presumably lives in his parent’s basement) things might be even worse. Attempting to “time the market” during the outbreak has been an exercise in futility for every idiot who read “A Random Walk Down Wall Street” that has a Robinhood account.

Speaking of Robinhood … if you do plan to trade, Robinhood is suffering its second day of outages. So even if you wanted a chance to lose your child’s college fund buying the dip, you wouldn’t be able to.

Fed rate cuts

For every action, there’s an equal and opposite overreaction. Or something like that, right? One of the first knee-jerk reactions to the markets shitshow mentioned above was the Federal Reserve calling an emergency meeting and deciding to lower interest rates (the Federal Fund Rate) by half of a percent today. The goal here is to stop the bleeding by making money “cheaper” so that people like you and I spend even more recklessly on Amazon while stuck at home during a coronavirus outbreak, thus boosting the economy. This is also meant to appease markets (which hasn’t worked at the time of this writing.)

The Federal Funds Rate affects credit card rates, home equity lines of credit, variable rate student loans, and small business loans. Institutions often link rates to the Federal Fund Rate but a 0.5% Federal Funds Rate cut doesn’t necessarily mean you’ll see that percentage drop directly reflected in your credit card rates or student loans.

Of course, it isn’t all good. Lower Fed interest rates mean potentially lower savings accounts yields. For what it’s worth this shouldn’t be a big deal since you’ll most likely need to withdraw your money from the bank and burn it for warmth when the coronavirus apocalypse hits. Oh, and did I mention that the Federal Funds Rate does NOT affect mortgage rates directly. Sorry to be the bearer of bad news.

Price hikes

In case you needed another reason to hate the coronavirus, you can probably expect to pay more for shit in the short term and for some time going forward. In the immediate future, enterprising douchelords will take to eBay to sell hand sanitizer for $100 per bottle. You can expect the same for face masks, bleach and zombie survival kits.

On a longer timeline, assuming humanity makes it that long, we can expect companies to pass along higher costs of good to us. The virus is already forcing companies to shift manufacturing to more expensive countries. Scarcity will also play a role … because, you know, supply and demand. Hard hit areas in Asia just so happened to be the same place lots of our favorite things are manufactured. Looking at you iPhone.

The bottom line

Odds are that the coronavirus will affect your bottom line somehow, someway. If you’re a Costco shareholder you might find yourself on the right side of history, whereas a Carnival Cruise line stock owner would gladly trade being a shareholder for a trip on the Diamond Princess. And while you might make a quick buck selling Purell there’s a chance a longer economic route could cost you your day job.

Either way, stay safe (physically and fiscally) out there, kids.

 

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