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coronavirus stock market crash | Hagemann Wealth Management

Coronavirus Stock Market Crash: What Impact Will It Have?

As the U.S. braces for the coronavirus to spread, consumers are racing to the stores to find that face masks, hand sanitizer and bottled water are all in short supply.  Shops have begun limiting quantities on these “in-demand” items. What does all of this have to do with investments and the stock market crashing? Aside from the fact that you may need (or want) to talk to an investment planning professional in Batavia, Illinois, the economy plays a huge role in the stock market and similarly, the stock market can impact the economy.  Let’s break that down a bit.


How Stock and the Economy are Tied Together

Many falsely assume that stock is impacted solely by the health of a company but their profits, losses, revenue aren’t the only contributing factors driving stock prices.  The economy is a major influence on the price of stock. Typically, the stock market can be indicative of how the economy is doing. If the stock market is booming, the economy is normally booming as well.  When stocks start falling consumers get wary overspending their disposable income, fearing another recession. 

Investopedia sheds some light on four key indicators regarding the stock market: 

  1. Employment
  2. Inflation
    • Producer Prices
    • Oil Prices
  3. Consumer Activity
    • Retail Spending 
    • Housing Market
  4. Investor Activity

Each of those four main indicators plays a role.  Employment, one of the biggest indicators, can greatly impact both the stock market and the bond market.  The more people that have jobs, the more money that gets spent. The more we spend, the more businesses grow and the more they grow, the more jobs they bring.  

 

Stock Market Crash in 2008

 The stock market crash in 2008 was a big deal.  While there are many contributing factors, the stock market crash in 2008 is often attributed to the housing market and more specifically, subprime housing loans.  Lenders were lending money to consumers with a poor credit history and too many consumers had taken out home loans in which they were not able to pay back.  Once the housing market began to decline, consumers began defaulting on loans.  

The final nail in the coffin was that once the lenders/banks found themselves in the situation with so many consumers unable to pay their debts, Congress refused a bank bailout which then sent the stock market plummeting.  Congress would go on to eventually pass the bank bailout bill, but by then it was too late – the damage had already been done.

 

Coronavirus Stock Market Crash

 Amidst the panic of the impact the coronavirus will have in the U.S., we saw the stock market crash with a ferocity we haven’t seen since the stock market crash in 2008.  In just a week’s time we saw the market go from records to corrections. While world health considerations aren’t a cause for financial woe, it is the resulting actions the world will take in an effort to combat coronavirus.

With more and more people opting to refrain from travel and even more either choosing or being made to work from home, there’s been an obvious drop in oil prices thanks to the lack of travel.  While it may be true that some areas of retail are booming – bottled water, hand sanitizer and face masks – it is also true that with stocks falling, many still feel the sting from 2008 and aren’t as willing to spend their disposable income on retail.  And with the virus being a global threat, our supply and demand chain for goods and services could be interrupted.

 

Investment Planning Professional in Batavia, Illinois

We may not be able to predict the future, but if you have questions regarding your current investments or are considering investing, you’ll want to speak with an investment planning professional in Batavia, Illinois.   

At Hagemann Wealth Management, we feel strongly that investment strategies should be tailored to address a family’s individual goals.  We were founded on the principle to serve clients with honesty, integrity and give them the best experience possible.  We strive to develop long-term relationships with our clients and help guide them through all aspects of their financial life – including the coronavirus stock market crash.  To discuss your wealth management or investment planning needs, click here or give our office a call at 630-326-9007.


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