Poverty An incredibly unfortunate side effect of COVID-19 was the dramatic impact the economic decline had on poverty rates in the United States, particularly among Black and Latino individuals, where poverty rates were already disproportionately high. The impact on COVID-19 on poverty in the U.S. was swift and devastating. According to research by the Center on Budget and Policy Priorities , from February to June 2020: • The number of non-elderly individuals living in families with combined weekly earnings below the poverty line rose by 14.1 million (28 percent), from 51.0 million to 65.1 million. • The number of non-elderly Black and Latino individuals with below-poverty family earnings rose by 3.6 million (40 percent) and 4.0 million (34 percent), respectively. Among non-elderly, non-Latino whites, the increase was 4.4 million (17 percent). • The number of children in families with below-poverty earnings rose by 4.9 million (34 percent), from 14.4 million to 19.4 million. • The percentage of non-elderly individuals living with below-poverty family earnings: • increased by 10.8 percentage points among Black individuals, from 26.9 percent to 37.7 percent, • increased by 7.8 percentage points among Latino individuals, from 22.9 percent to 30.6 percent, • increased by 3.2 percentage points among non-Latino white individuals, from 17.7 percent to 20.8 percent. The Stock Market Economic growth, employment, and poverty rates reflect what is currently going on the economy. The financial markets, particularly the stock market, reflect what is expected to happen to the economy in the future. Stock prices generally reflect expectations for the economy. If the economy grows, corporate profits generally increase, and stock prices increase. Despite the declines in economic growth throughout 2020, after the first quarter of 2020, the U.S. stock market focused on expected post-COVID economic growth. The table below shows the quarterly returns of three major U.S. stock indexes: 1) the S&P 500 – a diversified index that measures the stock performance of 500 relatively large companies (it is a “large-cap” index, generally comprised of companies having a total stock value exceeding $10 billion), 2) the NASDAQ – an index comprised of over 3000 companies listed on the NASDAQ stock exchange and heavily weighted toward technology, and 3) the Russell 2000 – a diversified index that measures the stock performance of 2000 relatively small companies (it is a “small-cap” index, generally comprised of companies having a total stock value less than $2 billion). For comparative purposes, the long-run average annual return (since 1926) on large-cap stocks is approximately 12 percent; on small-cap stocks, 16%.
Quarterly Returns U.S. Stock Market 2020 Q1 – 2021 Q1 (Source: Morningstar) 2020 Q1 2020 Q2 2020 Q3 2020 Q4
2021 Q1
S&P 500 NASDAQ
-20.00 -14.18 -30.89
19.95 30.63 25.00
8.47
11.69 15.41 30.99
5.77 2.78
11.02
Russell 2000
4.60
12.44
All three indexes significantly declined in the first quarter of 2020. The Russell 2000 (small-cap index) had the steepest drop at -30.89 percent. The S&P 500 (large-cap index) declined -20.00 percent, while the NASDAQ (technology index) fell -14.18 percent. Following the first quarter of 2020, it was up, up, and away for the all the stock indexes as the market looked forward to a post-COVID economic rebound. In the second quarter, the increase in the NASDAQ more than doubled the losses of the first quarter, as the NASDAQ was up 30.63 percent. The S&P 500 and Russell 2000 were up 19.95 and 25.00 percent, respectively, both almost fully recovering the losses of the first quarter. Strong increases continued for each of the indexes for the remainder of 2020. For the full year, the S&P 500 increased 16.26 percent and the Russell 2000 was up 18.36 percent, both higher than their historical average annual return. The NASDAQ increased an astounding 43.64 percent. All indexes increased once again in the first quarter of 2021, with the NASDAQ cooling down from its remarkable run in 2020.
Central Wisconsin Report - Fall 2020
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