U.S. stocks drop as COVID-19 cases rise and the election nears
Local experts say there are multiple reasons for why the U.S. stock market has seen one of the lowest drops since March.
LINCOLN, Neb. (KLKN) – Wednesday, the stock market saw a sizeable drop, after a few days of low numbers. One of the biggest drops since March 20. The Dow, Nasdaq and S&P 500 all sliding around 3.5%.
Eric Thompson, a UNL economics professor and the Director of the Bureau of Business Research gave Channel 8 some insight as to why the markets have seen a dip.
“We’ve learned that it doesn’t seem like there’s any possibility that will agree to have new fiscal stimulus for businesses and households in the us,” Thompson says. “We also know that the spread of the virus which for some consumers and businesses discourages economic activity and we’ve learned the spread of the virus is increasing.”
Thompson says as coronavirus cases in the U.S. continue to rise, consumers are more reluctant to buy and businesses may be playing it safe.
“Businesses will be more likely to keep their workers at home for longer if the pandemic is spreading more quickly,” Thompson says.
Other financial experts in Lincoln say that the recent dip in the market could also be due to the upcoming election.
“Prior to an election, the uncertainty of that typically causes the stock market to drop, and see some ups and downs,” says Bob Bennie, who works in wealth management as a financial advisor. “It hasn’t gone down like we saw last spring, its gone down a couple thousand points but we’re okay.”
Thompson agreed, saying that following elections the market typically improves.
“As that uncertainty is gone then the market sometimes goes up, not because of which side won necessarily, but because there’s more certainty about the future.”
However, Bennie says says he believes the market could change drastically depending on who wins the election.
“If President Trump is reelected and these lower tax and lower regulation policies continue, that’s a positive thing for business and both small businesses and larger corporations that are part of the stock market will continue to thrive,” Bennie says.
But Thompson says he believes it depends on who voters believe have stronger policies.
“Each one of them has strengths and weaknesses in their plans for the economy,” he says.
But overall, the two men agree that despite the lower numbers, now is not the time to worry.
“Its not necessarily something to be concerned about, but simply a reflection of additional information that people have over this week,” Thompson says.
Bennie says it’s not too late to pull your investments, but even during the steep downturn in March, that wasn’t his advise to his clients.
“My advise was to hang on, don’t panic. Panic makes you make mistakes in investing and in life, right? So don’t panic”.