- [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)