Invest
US businesses to survive 3 months due to health pandemic
American businesses can only survive the impacts of social distancing measures for another three months, with the economy unlikely to see a rapid return to its pre-pandemic state.
US businesses to survive 3 months due to health pandemic
American businesses can only survive the impacts of social distancing measures for another three months, with the economy unlikely to see a rapid return to its pre-pandemic state.
If American businesses can go without profits and purchasing inputs, their cash reserves should be enough to see them through the economic shock of social distancing measures — but if lockdowns continue after that, it’s anybody’s guess.
“The COVID-19 outbreak has brought the US economy to a screeching halt as most states have issued social distancing guidelines, leading many businesses to sharply curtail operations, if not close down entirely,” said Wells Fargo acting chief economist Jay H. Bryson.
“If many parts of the country remain in a virtual state of lockdown for the foreseeable future, then many businesses will eventually run out of cash and they will be forced to close their doors for good.”
While businesses that were profitable prior to lockdowns have a decent chance of survival, owners may opt not to use their cash buffers if they believe the medium- to long-term prospects of profitability look grim and instead close their business down in order to reinvest in other opportunities.
“If this potential scenario were to occur on a large scale, then the pace of the post-pandemic economic recovery could be adversely affected until the cash resources are successfully redeployed in other business opportunities,” Mr Bryson said.
Cash reserves are also not evenly distributed among businesses, with many relying on measures put in place by the Small Business Administration and the Federal Reserve.
While those measures might protect some businesses, those that have already failed or will in the future won’t be resuming operations, with displaced workers likely to remain unemployed for some time.
“We look for the officially reported unemployment rate to skyrocket to more than 15 per cent in the near term and for it to remain higher than 6 per cent at the end of 2021,” Mr Bryson said.
“These lending programs may be able to keep many businesses afloat for some time, but they do not ensure that the economy returns to its pre-pandemic state in a quick fashion.”
Stock market
The pros and cons of DIY investing
“Social trading” is being flagged as a very real issue now affecting the Australian stock market – especially as low-cost stock trade platforms gain popularity. ...Read more
Stock market
Where to find dividends in a low-rate environment
Australian investors who are income-focused are still able to find strong dividend-paying stocks, but the market is changing, an expert has said. ...Read more
Stock market
Did investors overreact to the COVID-19 pandemic?
The economic downturn has not hit many sectors of the economy as hard as first predicted, with the reporting season revealing that many sectors will recover quickly, an investment fund has revealed. ...Read more
Stock market
Market volatility not a worry for Millennial investors
In spite of COVID-19-related volatility, Australian investors aged between 24 and 39 remain bullish about the current sharemarket. ...Read more
Stock market
Why investors will miss their mark for the next 5 years
Australian investors are urged to rethink their investment targets, with the COVID-19 recovery likely to have an impact on returns, new research has found. ...Read more
Stock market
Standing strong in a crisis, ethical investments are here to stay
Ethical investments are more than just a short-term fad, an investment manager has advised. ...Read more
Stock market
Sovereign wealth fund goes negative for the first time since the GFC
The Future Fund has posted a rare negative return for 2020 and warned that a “challenging and volatile” economic climate could hurt previously strong gains moving forward. ...Read more
Stock market
Don’t worry about dividends: Stocks still going strong
Dividends are still up for grabs for active investors willing to wade through the major headlines and an abundance of market negativity, an investment expert has flagged. ...Read more
Stock market
The pros and cons of DIY investing
“Social trading” is being flagged as a very real issue now affecting the Australian stock market – especially as low-cost stock trade platforms gain popularity. ...Read more
Stock market
Where to find dividends in a low-rate environment
Australian investors who are income-focused are still able to find strong dividend-paying stocks, but the market is changing, an expert has said. ...Read more
Stock market
Did investors overreact to the COVID-19 pandemic?
The economic downturn has not hit many sectors of the economy as hard as first predicted, with the reporting season revealing that many sectors will recover quickly, an investment fund has revealed. ...Read more
Stock market
Market volatility not a worry for Millennial investors
In spite of COVID-19-related volatility, Australian investors aged between 24 and 39 remain bullish about the current sharemarket. ...Read more
Stock market
Why investors will miss their mark for the next 5 years
Australian investors are urged to rethink their investment targets, with the COVID-19 recovery likely to have an impact on returns, new research has found. ...Read more
Stock market
Standing strong in a crisis, ethical investments are here to stay
Ethical investments are more than just a short-term fad, an investment manager has advised. ...Read more
Stock market
Sovereign wealth fund goes negative for the first time since the GFC
The Future Fund has posted a rare negative return for 2020 and warned that a “challenging and volatile” economic climate could hurt previously strong gains moving forward. ...Read more
Stock market
Don’t worry about dividends: Stocks still going strong
Dividends are still up for grabs for active investors willing to wade through the major headlines and an abundance of market negativity, an investment expert has flagged. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
