Are you wondering how the recent plunge in the stock market will affect you? What effect will the fall have on your finances? Here are the answers.
The worldwide coronavirus outbreak and the sinking oil prices are significant factors in the recent stock market plunge. Oil prices have dropped 10%, a percentage loss we haven’t witnessed since the beginning of the U.S. invasion of Iraq in 1991. This, along with the novel coronavirus (COVID-19) pandemic, led investors to action, resulting in the DOW nosediving nearly 3000 points, the worst day on Wall Street since 1987.
So what does all of this mean for the economy as a whole? More personally, what does this mean for your finances?
A disintegration of market confidence
Whether or not you trade, the status of the stock market affects you. With a plunge in the stock market can come a recession. Even if a recession is avoided, a weak stock market hurts market confidence, leading to people holding off on buying homes and cars as well as general purchases. Less spending hurts the economy and negatively affects many industries.
For those near retirement, a plunge in the stock market can mean having to work longer than you’d intended to allow accounts like a 401 (k) or IRA to bounce back.
Decreased job security
For employees employed at businesses invested in the stock market, a plunge can mean little to no pay raise and possibly, less job stability.
Regardless of whether your employer invests, a disintegration of market confidence will very possibly affect salaries. While consumers cut back, so do companies because less money is being made. Less money coming in may result in cuts in pay, furloughs, and layoffs.
Less travel means less travel-related jobs
Even before the major stock market plunge, financial experts were already predicting economic issues due to the coronavirus pandemic. The pandemic has led to a significant decrease in travel that, in addition to damaging the airline industry, significantly hurts restaurants, hotels, and tourism areas and attractions across the world.
Even without an obligatory order to quarantine, many consumers decide to remain at home instead of going out or maintain a strategic distance from occasions where large groups accumulate, for example, concerts and shows.
Less money = less spending
Holding off on expensive purchases
There’s no denying the immediate impact that a weak stock market has on the general economy. When there is more money, consumers feel free to spend.
As consumers see venture salary decreases, they are bound to cut back. This influences sales of everything from homes and cars to luxury goods.
Mortgage and home loan defaults
If a weak economy prompts work reductions and layoffs, consumers may have difficulty paying home loans and mortgages. This could prompt foreclosures, which have a significant long-term effect on the whole of the real estate market.
Consumers who aren’t able to sell their homes before foreclosure may be forced to sell at a significant loss just to rid of the mortgage, leading to a further decrease in home values.
Our advice – don’t panic
While a plunge in the stock market always impacts the health of the economy, experts remind consumers to avoid panicking.
Experts advise investors not to make ill-advised, rash decisions, and for consumers, be cautious, but there is no need to panic. Consumers should live like it is any other day. Buy what you can afford and save when you can, per usual.
We know now that your spending – just as the 327 million other consumers – directly affects precisely how much this recent stock market fall affects the overall economy.
Be that as it may, on a day like today, it’s best to wait and see along with the rest of the world.