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  • - [Man] What will happen to the stock market?

  • - [Woman] What should I do with my stimulus check?

  • - [Man] Will the economy recover?

  • - Hey, everyone, it's Sallie Krawcheck,

  • CEO and Co-founder of Ellevest,

  • the investing platform built by women for women.

  • And today I'm gonna answer

  • some of your most commonly googled questions

  • about the stock market and the economy.

  • (upbeat music)

  • - [Man] Who gets stimulus money?

  • - Well, I hope you do.

  • You can receive up to $1200

  • plus $500 for each dependent child.

  • And you'll receive a stimulus check

  • if you have a social security number

  • and you filed taxes in 2018 or 2019.

  • And if you don't earn enough to file taxes,

  • you can get it if you receive social security payments.

  • Now you get a payment,

  • it's on a sliding scale,

  • it's a little complicated cause it's the government,

  • but you receive a payment is you earn less than $99000

  • if you're a single filer,

  • if you earn less than $136500 for head of household

  • or less than $198000 for married filers

  • in your most recent tax return.

  • - [Woman] What should I do with my stimulus check?

  • - Well, in theory,

  • you should do whatever you want with it.

  • The government sent that money out

  • with no strings attached

  • so that you could spend it,

  • so that they could stimulate the economy,

  • that's why it's called stimulus money.

  • Now what do I hope that you will do with it?

  • I hope that if you have credit card debt outstanding,

  • or other high interest rate debt,

  • then you'll take this money

  • and pay some portion of that off,

  • it's high interest rate,

  • it tends to sap your wealth,

  • it's very expensive.

  • I also hope, if you don't have savings,

  • what we call an emergency fund,

  • that's the equivalent of several months of take-home pay,

  • that then you'll put this into savings

  • and have that there as a caution for yourself.

  • I also hope you'll put it in your 401(K)

  • and invest for future you,

  • or invest for a future goal.

  • But it really is in order to stimulate the economy

  • and so I know the government

  • and small businesses will be perfectly happy

  • if you go out and spend it.

  • - [Man] What will happen to the stock market?

  • - Bottom line, in the short to medium term, nobody knows.

  • I don't care how confident they sound,

  • I don't care how often they tell you

  • how ranked they have been historically,

  • nobody can predictably forecast the performance

  • of the stock market

  • or individual stocks over the short to medium term.

  • There're just too many factors that drive it,

  • one of which, very importantly,

  • stock prices aren't reflective

  • of just what's happened in the past,

  • which is pretty easily analysable,

  • they also are reflections

  • of what expectations are for the future.

  • And so the expectations of the future

  • can change on any given day, they can be wrong,

  • they can be right and that's what makes stock prices move.

  • Now what I can tell you is that over the long term

  • since the 1920s,

  • the stock market's gone up by about 9.7% a year,

  • and it's quite attractive.

  • And that is despite World War Two,

  • The Great Depression, the Vietnam War,

  • the Korean War, stagflation, inflation,

  • oil crises, the Great Recession,

  • the internet bubble burst,

  • that even with these tough things

  • that have happened to our economy,

  • the economy is such, that it continues to grow

  • over periods of time

  • and the stock market continues to reflect that

  • even during tough times,

  • it's been upward trending with volatility around that trend.

  • - [Woman] Why is gas so cheap?

  • - Prices are set by supply and demand.

  • If there's a lot of demand for something,

  • people really want something,

  • but there's not a lot of supply,

  • there's not a lot of it, prices go up.

  • If instead, there's not much demand,

  • say people aren't in their cars,

  • they're sheltering in place,

  • they're not traveling,

  • they're not going many places,

  • and there's a lot of supply,

  • then prices go down.

  • That's why gas prices are low right now.

  • - [Woman] Is it a good idea to buy a house right now?

  • - Okay, if you're asking

  • because you think house prices are a little soft

  • and you can buy one and potentially flip it

  • and make money, please don't.

  • If you are looking for home for you to live in

  • and for your family to live in,

  • it could be a good time to buy right now,

  • if you're in good shape financially.

  • Have you paid off your high interest rate debt,

  • your credit card debt for example?

  • Have you built an emergency fund

  • that some months of take-home pay as a safety net?

  • Is the company you're working for

  • in pretty good financial shape,

  • are they getting through this down turn well?

  • If you can answer yes to all of that,

  • then if you can afford a down payment

  • for the home that you love,

  • that's 20% of the home's value,

  • so you don't have to take a big mortgage

  • relative to it,

  • then this could be a good time to buy a home.

  • - [Woman] Is it a good idea to buy stocks now?

  • - Historically, it's almost always a good idea

  • to buy stocks right now.

  • If you can invest in those stocks,

  • and leave that money there for the long term,

  • say 15 years.

  • If you'd invested on any day since the 1920s

  • and left the money in the stock market,

  • broad-base diversified portfolio the stock market,

  • for 15 years, you're chances,

  • even with all the ups and downs,

  • of a positive return were 99%.

  • - [Woman] Will the housing market crash?

  • I'm not gonna lie, it could.

  • I'm not saying it will,

  • but of course it's a possibility as people earn less,

  • potentially can't pay their mortgage,

  • potentially have to sell it fire sale prices,

  • and have to do it at the same time

  • a lot of other people perhaps have lost their jobs

  • and aren't feeling confident about buying.

  • Now it is instructed

  • to look at the last housing market crash,

  • it was driven by over leverage,

  • which were people buying big homes with big mortgages,

  • and when the prices of homes started to soften,

  • the house value goes down but the mortgage doesn't.

  • And so these individuals

  • ended up under water pretty quickly,

  • therefor tried to panic-sell,

  • couldn't find a market for.

  • This down term is driven by buyers not over leverage

  • in the mortgage markets, people having big mortgages.

  • And so what's really gonna matter here,

  • is the depth and the length of the recession

  • and how quickly we recover.

  • - [Man] Should I invest in oil stocks now?

  • The answers are, it depends and yes.

  • If you're thinking about it as a short term play,

  • a short term bet, then sure.

  • We talked earlier about how no one

  • can forecast accurately where the market

  • or sectors going over the short or medium term,

  • so take the money you would have taken

  • to the trip to Vagus that got canceled,

  • and go ahead and make that bet on oil stocks if you want.

  • The other answer is yes.

  • If you're thinking about investing in oil stocks,

  • as part of a long term diversified investment portfolio,

  • stocks, bonds or a range of different industries,

  • and the answer to my mind is always yes.

  • - [Woman] What happens in a recession?

  • - A recession is defined as six months

  • or more of economic contraction or negative economic growth.

  • Could last for six months or can last for years.

  • In a recession, companies tend to sell less,

  • they thus can loose money,

  • they thus look to cut back on spending,

  • people loose their jobs, house prices can go down,

  • the stock market can go down.

  • - [Woman] Who will be affected by a recession?

  • - The answer is everyone can be,

  • though of course to different extents.

  • And you can see how these things

  • can sort of become self re-enforcing spirals,

  • where if businesses are selling less,

  • and then they're firing people or reducing pay,

  • and then the consumer doesn't feel as good,

  • so doesn't buy as much, so the company sells less,

  • so reduces pay, so the consumer doesn't feel as good.

  • And so the effect of a recession

  • can be self re-enforcing,

  • and that's why you often hear, as you are in this down-turn,

  • about economic stimulus,

  • where the government steps in with tax cuts

  • or interest rate decreases

  • in order to put more money in the consumers pocket,

  • in order to,

  • in this case businesses pockets,

  • in order to encourage them,

  • the consumer to spend more and the business

  • to keep people employed.

  • - [Man] Will the economy recover?

  • - The economy has recovered from every economic recession

  • and economic depression, 100% of them.

  • And we can criticize capitalism for any number of things,

  • but it's ability to drive growth,

  • to drive recovery, is second to none.

  • - [Woman] Should I pay my rent?

  • - The answer is if you can afford to, absolutely.

  • If you can't afford to, call your landlord

  • and see what the two of you can work out.

  • After you hang up with him/her,

  • call the utility company, call the electricity company,

  • call the cable company, call the cellphone company,

  • call your student loan provider,

  • call the credit card company,

  • call call call, spend that time calling.

  • You never know, the answer may be no,

  • but by spending the time,

  • more and more of these companies recognizing

  • the shape the economy's in,

  • the shape that consumer's in,

  • are really working with consumers today,

  • in order to work out different payment plans

  • or defer payments.

  • I hope that answers your questions,

  • maybe your concerns about the stock market

  • and about the economy.

  • I'd invite you to come over to ellevest.com

  • both to learn more about Ellevest

  • as well as go to our magazine page,

  • where we've got a ton of information about all things money,

  • and particularly as we're going through this downturn,

  • a lot of information to work to help you navigate it.

  • If I didn't answer your question,

  • or you don't see it there,

  • email us at questions@ellevest.com,

  • we are committed to answering every money question

  • that our broader community has for us,

  • as we all navigate through this time.

  • (upbeat music)

- [Man] What will happen to the stock market?