4 Reasons to Invest in the Stock Market
Four key factors helping the stock market right now are fiscal policy, monetary policy, dividend yield, and VIX. Learn from expert, Justin Pitcock, Certified Financial Planner™ at Goodwin Investment Advisory as he shares about these four reasons to invest in the stock market in remarkable detail in this YouTube video above.
1. Fiscal Policy
Economic stimulus from Washington – Congress is working to pass a $2 Trillion economic stimulus package that includes:
• All U.S. residents with adjusted gross income up to $75,000 ($150,000 for married couples) would get a $1,200 ($2,400 for couples) “rebate” payment.
• People who are “unemployed” would get an extra $600 per week for up to four months, on top of state unemployment benefits to make up for 100 percent of lost wages.
• The stimulus includes nearly $25 billion for food assistance, including nearly $16 billion for SNAP and nearly $9 billion for child nutrition.
• The hospital industry is getting what it asked for — $100 billion in rescue funds.
• Health care providers would secure $100 billion in grants to help fight the coronavirus and make up for dollars they have lost by delaying elective surgeries and other procedures to focus on the outbreak. They would also get a 20 percent bump in Medicare payments for treating patients with the virus.
• Airlines would receive $29 billion in grants, and $29 billion in loans and loan guarantees, as well as a reprieve from paying three of their major excise taxes on the price of a ticket, the fuel tax and a cargo tax.
• Nearly $24 billion, including $14 billion for an obscure Depression-era financial institution that USDA has wide discretion to use to stabilize the farm economy. Another $9.5 billion would be set aside for emergency aid for the agriculture sector, including cattle ranchers and fresh fruit and vegetable growers.
• Businesses would get a tax credit for keeping idled workers on their payrolls during the coronavirus pandemic, so long as the businesses meet certain criteria. They would get a refund for half of what they spend on wages, up to $5,000 per worker.
• The Treasury Department would divvy up a $500 billion pot of loans to struggling industries like airlines, and even cities and states.
2. The Federal Reserve
- “unlimited” Quantitative Easing
- MBS purchases – $200 Billion
- Treasury Bonds – $500 Billion
- Other – $300 Billion
- Corporate Bonds
- Asset backed securities (CDLs)
- Money market instruments
- SBA loan
- Cut interest rates to zero
3. Dividend Yield
• S&P 500 = 2.26%
• Dow = 3.17%
• 10 Year Treasury Bond = 0.88%
An index representing the market’s expectations for volatility over the coming 30 days. Investors use the VIX to measure the level of risk, fear, or stress in the market when making investment decisions.
• Index ranges from 0 to 100
• Global Corona Virus Market Panic Peaked at 85
• Financial crisis of 2008 peaked at 89
• Current level is about 60
• This implies that institutional investors are more confident that stocks have a higher probability of going up!