Could 'Flying to Safety' Be Dangerous?
When markets turn volatile and uncertainty rises, it’s common for investors to flock to what they perceive to be safer assets. Despite well-documented perils to such market-timing maneuvers, it can be tough to overcome the urge to get out of the market and wait on the sidelines until markets return to “normal.” (Professor Amit Goyal discusses the potential shortcomings of market-timing strategies here).
Flows into money market funds indicate many investors have again flown the coop since the current market downturn began in late February. Government money market funds (MMFs) are a popular destination for investors seeking a “safe” port, andFigure 1shows that more than $1 trillion has poured into the category since February 19. By way of comparison, government MMFs experienced year-to-date net outflows of more than $30 billion before the downturn. While we don’t know exactly where the money came from, we believe it’s safe to assume that a significant portion came from equities.
The Fed’s Balance Sheet: The Other Exponential Curve
As the threat of COVID-19 keeps millions of Americans locked down at home, businesses and financial markets are suffering.
For example, a survey of small-business owners found that 51% did not believe they could survive the pandemic for longer than three months. At the same time, the S&P 500 posted its worst first-quarter on record.
In response to this havoc, the U.S. Federal Reserve (the Fed) is taking unprecedented steps to try and stabilize the economy. This includes a return to quantitative easing (QE), a controversial policy which involves adding more money into the banking system. To help us understand the implications of these actions, today’s chart illustrates the swelling balance sheet of the Fed.
Scams Abound Amid Pandemic Panic
Sadly, as is the case in any crisis, there are those among us who are looking to capitalize on cruelty and take advantage of heightened vulnerabilities. Hackers are trying to lure victims to click on COVID-19 related hyperlinks that contain malicious software and other computer viruses. In some cases, these scams look like official messages from the government and they send people to fake websites where their sensitive information can be stolen.
The following guidelines can help you protect yourself from these digital scams and stay clear of suspicious links you may come across in your internet travels.
CARES Act Signed into Law –Brings Relief to Millions of Americans
On March 27 the President signed into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to address the unprecedented public health and economic crisis related to COVID-19.
This $2 trillion bill is meant to impact both individuals and businesses and contains significant tax-savings measures. It could affect prior tax years while also creating immediate cash-flow.