Markets rallied this week as U.S. President Donald Trump signaled the beginning of the end of steps to curtail the coronavirus. Self-isolation and stay at home orders will last through the end of April and will most likely lift by May, according to Trump. New York State, the hardest hit of U.S. states, also extended it’s “stay at home” order until April 29. As American deaths approach 15,000 from the coronavirus, the U.S. is looking to follow Italy and Spain, countries that are seeing a decrease in newly confirmed cases. This news out of Europe was referred to as a “glimmer of hope” and the “light at the end of the tunnel” by both Vice President Mike Pence and Trump.
The S&P 500, NASDAQ and the Dow Jones Industrial Average were all up over 10% on positive news out of Washington. Should this “glimmer of hope” hold, municipalities may begin returning to “normal” in a few weeks. Trump also mentioned he was “looking at” new stimulus measures and said the first $2 trillion in stimulus would be paid out to Americans and their small businesses in the next two weeks. These checks, which will average $2,400 per family, while a much-needed boost for most Americans, will arrive far too late. Over 10 million Americans have already been fired in the last two weeks of March and the unemployment rate increased to 4.4%, not counting the last week’s firings.
The current U.S. unemployment rate is likely over 12% and may go as high as 30%, according to many analysts including former Federal Reserve Chair Janet Yellen. An unemployment rate of 30% would be unprecedented and would rattle the U.S. economy unlike any other event in the history of the country. For context, the unemployment rate during the Great Depression was at its peak, 24.9%. Sustained unemployment up to 30% would derail the U.S. economy and the global economy as we know it. While the U.S. accounts for only one-quarter of global GDP, all commodities are traded in dollars and therefore the health of the U.S. and its currency concerns all countries.
Should Trump suspend steps to curb the spread of the virus on May 1, the virus will most likely continue to spread, taking thousands of more lives. Should he impose long term stay-at-home orders, unemployment will skyrocket and Americans that can’t afford health care as it is will be largely left out in the cold. With no employment and no health insurance, millions of Americans will be vulnerable and will demand a change of the current political and economic system. What the U.S. will look like months from now, without a major increase in government stimulus, is anyone’s guess but said stimulus is now a necessity to stave off both humanitarian and economic disaster.
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