The Fed cuts interest rates to 0%, but the markets are still down; unemployment figures may hit 20%


With the coronavirus continuing to spread, the impact it has left on small businesses and the economy cannot go unnoticed. As the outbreak carries on, cancellations on vacations, reservations, and large gatherings place pressure on the economy.

  Small businesses have begun to prepare themselves for the impact of the virus, as they close for the next month, laying off many workers. The lack of public life weighs on many businesses, who sell an array of items.

  Recreational sports like baseball and soccer have been put on hold in some states. This leaves stores such as Dick’s Sporting Goods, or Modell’s in a vulnerable position forced to put a freeze on employment.

  Major events, expected to bring in large amounts of revenue, have been canceled. Suspended NBA, NHL, and MLB will cause decreased revenues in local bars and restaurants.

  Although the focus of COVID-19 should be on the health of the individuals it can impact, there are long term effects of the virus even after it has been controlled.

The U.S. financial markets have seen immense changes, the Dow Jones suffered a 12% drop in five trading days. The declines have been attributed to the unknown the virus has introduced.

  As markets continue to be incredibly volatile, the Federal Reserve announced a $1.5 trillion plan to help stabilize the financial system.

  The Federal Reserve has also cut interest rates to zero, in an attempt to support the economy. The Fed bought $700 billion worth of Treasury Bonds and mortgage-backed securities.

  The cuts are intended to protect the markets from disruptions and to allow financial markets to function normally.

The Fed said it is “ prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.”

  If the virus continues to spread, demand will decrease, and this could lead to a recession. This has left investors and other businesses to prepare as if a global shutdown is not far away.

  With so much being left unknown about the coronavirus, the economic decline is left unsure to the world.

  Large companies such as Nike and Apple have admitted to feeling the impact of the virus as China makes up a huge share of the economy.

  Not only do the companies manufacture their products in China but also a significant number of their products are sold there.

One lasting effect of the economic changes is companies will begin to rely less on China. Companies will diversify their supply chains to protect themselves against another major crisis.

  Initially, many investors believed the markets would see a drop due to some of the coronavirus fears, and then businesses could continue on regularly. This was not the case.

  Markets do not like uncertainty and now investors have reached an understandable level of nervousness.

  One positive outcome of the pandemic is maybe now the country will be better prepared for the next emergency.

  Although the next crisis is impossible to predict, the impact of the coronavirus will leave the economy and companies better arranged for the next.