The 2020 Stock Market Bailout JUST Ended | How To Invest

What's up, Grammers? It's Graham here!

So there's been this running joke that the lower the buttons go in my shirts, the higher the stock market rises. I don't know what this means if I'm wearing a crew neck today, so hopefully my decision not to sport the unbuttoned look is not going to cause the markets to go down.

That's because over the last week there's been a lot of talk, scrutiny, and criticism about the recent change to suddenly stop some of the bailouts that were initially put in place to prevent the economy and the stock market from collapsing. This new decision pulls about 450 billion dollars away from the Federal Reserve. It ends several key emergency loan programs from functioning after December 31st, and since it was announced, there's been a lot of concern over what this might do to the stock market and if this might cause another impending drop once the bailout ends.

After all, as we all know, these programs were set up and designed to keep our economy afloat, and from the stock market's perspective, it worked really well. But what about now that it's soon coming to an end?

Well, without further ado, I'll break down exactly what just happened, what this means, how this impacts you, how you could use this information to make money, and most importantly, how you could bail out the like button for the YouTube algorithm by just giving it a gentle poke.

Do you remember when that used to be a thing on Facebook, by the way? Just giving pokes to each other? Well, that's how we could all bail out the like button. Just a quick push is all it takes, and the almighty algorithm is going to reward you with its blessings.

So thank you very much! And also, a big thank you to Morning Brew for sponsoring this video, but more on that later.

All right, so here's what's going on to bring everyone up to speed. Initially, when the markets were tanking back in early March of this year, the Federal Reserve came to the rescue by saying that they would purchase unlimited assets in order to support the markets and companies in need of money to prevent them from going under.

And nearly immediately after this bailout was announced, the stock market started climbing back up. So basically, what this does and what they just did is this: If a city, state, or company is in need of money, they could issue what's known as a bond, which is really just a fancy word for IOU. It's really just an agreement that says we want to borrow this amount of money, and we'll pay you this specific interest rate and pay it all back over this amount of years.

But what happens if a company needs to borrow money because they were forced to shut down? No one's buying their products anymore, and no one is willing to lend them anything. Well, I'll tell you that business won't have any money. They might be forced to shut down permanently, which means they might have to lay off those employees, which means any other businesses that rely on those products or services might go down alongside with them.

Well, the Federal Reserve saw this issue, and they didn't want it to be a domino effect of one business collapsing, another collapsing, another. So they said, "No problem, we'll lend you some money. How much you need? Okay, we'll give you that amount."

Because when you get money, you'll employ people; you'll keep the economy afloat long enough for us to be able to push through this. Now, when all of these lending programs were started, they were set to expire on December 31st, 2020. So in about a month from now, with the expectation that if things are really bad in the future and we need to extend it beyond that, we can.

So businesses would have access to more money. But it was just announced that the Treasury has ordered the Federal Reserve to stop those lending programs and return that 455 billion dollars, essentially ending the bailout. And of course, that's drawn a lot of criticism.

On the one hand, the Treasury, who was the one who ended the bailout, says the program worked as intended; it's no longer needed, and out of the 450 billion dollars that was allocated for this, only 20 billion of it had actually been used.

Now, on the other hand, the Federal Reserve says that this money is essential in acting almost like an insurance policy for our economy, where even though you might not need it, everyone feels safer just knowing it's there. It could be used at any time, and that was the purpose of this money to begin with.

It's like the difference between living paycheck to paycheck and constantly stressing about paying the bills versus having a huge emergency fund available to you if you were to need it. And sure, you hope that nothing comes up where you would need to use the emergency fund, but you'll sleep better at night knowing that just in case it's there.

And essentially, that's what this 450 billion dollars acted like. That helped the markets recover; investors just felt a lot more comfortable lending money and buying bonds knowing that if anything were to happen, the Fed has a whole bunch of money sitting there just ready to deploy.

So with this money being taken back, the concern is that we're pulling the rug from underneath the economy at a time where maybe more shutdowns are going into effect, and now is not going to be the best time to take this money back.

So here's what this means for you, the stock market, and the economy, and whether or not this is really as big of a deal as some of these articles make it out to be. But before I get into that, I want to say a huge thank you to our video sponsor today, Morning Brew.

They're a totally free daily newsletter that gets sent to you every Monday through Saturday, and they bring you up to speed with the most important business and financial-related news in just under five minutes.

What's the big deal, you ask? Well, let me explain: Usually, when you go on the internet, you waste a whole bunch of time sifting through pointless information articles about nothing, trying to find something interesting. And pretty soon, before you know it, you're browsing Reddit's Wall Street Bets looking for another meme stock.

But Morning Brew aims to make your day just a little bit easier by giving you the best finance and business-related highlights of the day condensed down into exactly what you need to know. Like, they recently covered the significance of the Dow hitting 30,000; they talked about the final results of the retail earnings reports; and to keep you on your toes, they'll throw you a quiz that you could play along with, like which of these companies are in the Dow: It's two, three, and four.

I also personally enjoy this newsletter so much that I read it as the first thing I do when I wake up in the morning just so I have a fresh recap of what's going on in the world. And because this is the best, most important information that I need to know, I don't waste time scrolling Reddit.

So if you're interested in business, finance, or tech, just use the link down below in the description to sign up. It's totally free and will take you less than 15 seconds. So thanks so much, and with that said, let's get back to the video.

All right, so back to the topic at hand. Here are the facts about what's going on, and realistically, whether or not this is going to impact you. When the Treasury announced their decision to pull back this 450 billion dollars, it's not like the money just disappears forever.

It's not like the Joker, who just goes and lights it all on fire to prove a point and then laugh at his enemies. Instead, this money is going into what's called a general fund, where it might be able to be used for different purposes in the future.

However, when this money is placed in the general fund, it could only be allocated and spent with approval from Congress, which right now, in all fairness, we're not sure if they're going to approve any new spending. So far, they've taken more of a wait-and-see approach, and if something comes up, then they will address it at that time.

So it's too early to tell for sure. And of course, yes, putting the money in the general fund is one more barrier to spending or allocating any of this money because it does have to pass through the House and the Senate.

But the hope and expectation here is that this money would be used instead towards small businesses and unemployment instead of helping out big corporations in need of money. And the logic with this, on the surface, is that very little of that 450 billion dollars was actually used, so they're saying where's the harm in repurposing this for something else?

Well, the main concern when it comes to all of this, as I mentioned, is that the purpose of this fund is to make investors feel more comfortable about lending money. One of the major reasons why the stock market stopped dropping is because the Fed stepped in and inadvertently boosted up by telling everyone they're going to do whatever it takes.

That includes 450 billion dollars ready to deploy at a moment's notice if the economy actually needs it. Think of all of this like just having a backup parachute when you're skydiving. It's something you never hope you need, but just having a backup makes you feel a lot safer about jumping.

And that's the exact purpose of what this money did. It got investors to feel more comfortable about investing; people felt safer spending money; companies were able to borrow money, and from that perspective, it worked perfectly.

Sure, the Federal Reserve was not always meant to boost up the markets, and this was not meant to be a brand new permanent thing where if a struggling company needs money, they just raise their hand and they get it. But economists are warning that there's still a chance that everything could turn around and go down.

And even though things are working right now, it's not over quite yet. Basically, what they're saying is that we need to keep the program going; we got to keep the money in there to play it safe until we're 100% sure everything's gonna be okay.

So there's still a risk that things could shut down again; investors won't feel comfortable investing anymore without that safety net, and that some businesses won't have access to that money if they need it.

But realistically, here's what's probably going to happen: As of now, even though yes, cases are rising, unemployment is high, and we're not sure if we're going to see further shutdowns, the markets are working as expected. Investors are feeling more comfortable; companies are beginning to stabilize; the vaccine is in the works, and we are slowly getting through this.

This program was designed to grease the wheels, so to speak, and that was it. Now sure, this does not necessarily reflect some of the businesses and people who got hit really hard from this, but if we're talking about the general market from the lending perspective, people are not hoarding money anymore, and there's no longer the risk of frozen credit and deflation that was the big concern earlier on in this year.

Now, in terms of the stock market, as of right now, it had a brief reaction and dip shortly after it was announced, but the general consensus here is that things are getting better. Not a lot of the money was used, and the new Treasury Secretary Janet Yellen is expected to push for this money back if and when it's needed.

So basically, the stock market did what it always did, which is just continue to go up. Seriously, I think at this point an asteroid could hit earth, and the stock market would still go up because now the new apocalypse stocks are rallying.

So anyway, long story short, even though this money was used as somewhat of a training wheel to keep our economy afloat, the Treasury is taking a side right now that the market is strong enough to move on its own. They don't need all of the money just sitting there, and now they're able to repurpose it for something else, or it could all just go unused depending on what's voted on.

So overall, despite this being the end of that specific bailout, I personally don't see it as that big of a concern, and as usual, I believe a lot of these articles are blowing this into something it isn't.

Ultimately, it was designed from the very beginning just to be something that was temporary, just to get our economy going again. And from that perspective, it did its job, and now we have a better understanding of what the market wants, where that money is better allocated, who needs it more than others, and from there it could be deployed as needed.

The biggest risk that I see is that if something were to happen again and we encounter another March-like panic in the market, we won't have the same backstops that we do now with the Feds stepping in and saying, "Hey, you guys need money? No worries, here's a whole bunch of money." But that's not to say we can't reinitiate some of this stuff later on in the future if needed; albeit, it'll probably take a little bit longer to get set up.

The markets evidently feel the same way as I do about this as well because they just continue to go up. But I'm sure this is something they'll be keeping a very close eye on, and I still feel at the end of the day, for better or for worse, if the economy gets bad enough, and if it looks like things are going to be seizing up again, they will step in to find a way to make it work and to help out.

And at the end of the day, it's really that type of investor confidence that they're going for to begin with.

So with that said, you guys, thank you so much for watching! I really appreciate it as always. Make sure to destroy the like button, subscribe button, and notification bell.

Also, feel free to add me on Instagram; I posted pretty much daily, so if you want to be a part of it there, feel free to add me there.

As on my second channel, The Graham Stephan Show, I post there every single day I'm not posting here. So if you want to see a brand new video from me every single day, make sure to add yourself to that.

And lastly, if you guys want four free stocks, use the link down below in the description, and Weeble is going to be giving you four free stocks when you deposit 100 on the platform, with those stocks potentially worth all the way up to 1,600 dollars.

So if you want basically free money, use that link down below.

And then by the way, just a heads up for everyone that made it to the very end of the video, because it's Cyber Monday, I'm going to be giving 200 dollars off both of my programs, the YouTube Creator Academy and the Real Estate Creator Academy, by using the links down below in the description.

So if that's something you're interested in, and you like saving money, just go ahead and do that. And as usual, there's a no questions asked refund policy for the first 21 days; you'll get 100% back if you're not happy with it for any reason.

So there you go! Thank you guys so much for watching, and until next time!