Shutterstock
The outbreak of the COVID-19 disease, caused by the novel Wuhan coronavirus, has shaken faith in global markets. The specter of a looming epidemic that has an astonishing virality and high mortality rate has caused the US stock market to tumble to historic lows. Predictions of sickness and death are scaring economists.
In the face of these concerns, the Federal Reserve has just announced an emergency rate cut. This cut will bring interest rates down by half a percentage.
This is the first emergency rate cut since the 2008 financial crisis. It’s the steepest individual cut since that devastating market turndown.
The Federal Reserve confirmed that, while people are trying to remain optimistic, “the coronavirus poses evolving risks to economic activity.”
As early as one week ago, the Fed seemed hesitant to discuss rate cuts in the face of the novel COVID-19 virus. The Fed’s chairman, Jerome Powell, was noncommittal. He said the central bank would act “as necessary” to respond to the disease’s influence. However, more than a week of plummeting stock market numbers have led to the decision to issue the emergency rate cut.
Why are numbers plummeting? Factories are losing productivity and workplaces are being shut down. People dying, of course, is also a reason for stocks to drop.
If a sizable percentage of the workforce is unable to come to work, or dies from the disease, markets will continue to tumble. Interest rates won’t change that. However, one upside is that with interest rates so low, the stock market is ripe for discovering good investments for beginners.
Among those shaken by the market’s nosedive is President Trump. His messaging on the virus has been very uneven.
Experts say that the virus is in the stage of community spread. But Trump has insisted that the situation is “under control.” Those close to the president have stated that, behind closed doors, he is furious that the stock market is in free fall while he’s president.
The virus is ability to go undetected in people who have it. That means it can easily make the jump to others who may be at greater risk of death.
Eighty percent of those who get the virus will experience only mild symptoms. The disease carries a case mortality rate of roughly 3.4 percent.
Those who are at risk of dying from the disease are older people or people with underlying health issues. An underlying health issue is something like a compromised immune system. With a mortality rate as high as COVID-19, experts expect the disease to have an outsized impact on day-to-day life. This is not just in the US, but all over the world.
One researcher even suggested that as many as forty to seventy percent of the world’s population could be infected with the virus.
