For many Americans, the market volatility and constant recession talk has brought back the memories from 2008. The Coronavirus has been deemed the “Black Swan” that has put a dagger in the aging bull market.
Take a breath. These two events are very different.
The Great Recession was started by an accelerated housing market that was fueled by banks and lenders who were approving mortgages to unqualified buyers. Banks bundled the mortgages and sold them to other financial institutions, essentially playing hot potato.
Currently, there are more than 100,000 cases worldwide. Most have been in China and China is seeing a large downturn of reported cases. We are seeing countries take proactive measures from Italy shutting down travel and the United States having no spectators for the NCAA College Basketball Tournament.
The Great Recession caused quite a downturn. During this time period we saw unemployment reach ten percent and over 8,000,000 Americans lose their jobs.
Recently, the February Jobs report was released. Non-Farm payrolls rose by 273,000 vs an expected 175,000. Yes, this is before the most recent pull back but we did see the Coronavirus start to appear in late 2019 in China.
During The Great Recession was saw equity markets fall by over 50%. As of the close of business on Wednesday, the Dow Jones just made it into bear market territory (-20%), the S&P 500 is just outside of bear market territory.
During The Great Recession, the Federal Reserve estimates that household debt climbed to 134% of gross domestic product. They also calculated that the average American was saving less than 4% of their paycheck.
In 2020, household debt is at 96% of GDP and the average American is saving close to 8% of their income.
With all of this said, the FEELING of a down market remains the same. It is never pleasant seeing statements in the red. If you'd like to discuss the differences in the downturns in more detail, we wouold be more than happy to talk with you about it. For now, take that deep breath, relax and keep your goals in mind.
Information in this blog was from : https://www.usatoday.com/story/money/2020/03/11/recession-heres-how-coronavirus-crises-different-2008/5012228002/