Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

All Your Questions About The Coronavirus And The Stock Markets Answered

"If it was easy to predict, I would be rich and so would you."

"Stock market crash!" read the panicked headlines last week, after the spread of the coronavirus continued with outbreaks of COVID-19, the disease the virus causes, in Iran, Italy, Japan, South Korea, and the United States.

The resulting fear caused the US stock market to have its worst week since the start of the 2008 recession.

But should people be stressing about the market upheaval? Is your money at risk? We look at the experts for advice on how the coronavirus is affecting the markets.


What exactly is going on and why is the stock market freaking out?

Markets really don't like uncertainty, because it makes it hard for businesses to plan. So the spread of a potential global disease fuels huge panic.

Investors have been selling their stock to get their money out of the market, or into "safer" investments. Last week $5 trillion was wiped from global financial markets.

The Dow - short for the Dow Jones Industrial Average, an index of 30 major blue-chip stocks that is often used as an indicator for the market itself -had its single biggest one-day drop in history, falling 1,191 points on Thursday.

But the drop felt even more dramatic because two weeks earlier the Dow hit a record high.

"Part of the stock market decline is the result of stocks being overvalued," economist Mark Weisbrot, codirector of Center for Economic and Policy Research, a Washington think tank focused on economic policy, told BuzzFeed News -meaning the drop was partly just the market correcting itself.

While it was the biggest point drop in history, there have been much larger drops in terms of percentage of the Dow overall. For some historical comparison, the Dow dropped 4.4% last Thursday, however during the Wall Street crash of 1929, it dropped 13% one day and 12% the day after.

Plus, it's not like years and years of investment gains got wiped out last week.

"The stock market saw its worst week since the financial crisis as coronavirus fears gripped markets," said Greg McBride, chief financial analyst at Bankrate.com, in a statement. "But the market is still higher than it was as recently as last August."


Which stocks are being most affected?

All of them! But oil stocks plummeted as travel has been cut, factories across China closed, and manufacturing and deliveries halted.

"For now, what we know for sure is that the month of February will record the worst oil demand contraction since the Great Recession," said Claudio Galimberti, head of demand, refining, and agriculture analytics at S&P Global Platts, a financial information company, in a statement.

"We also know that global aviation will be hit very hard across Asia and take months to get back in shape," said Galimberti.

Many companies in the US -including Twitter, CNN, and Amazon -have said they are cutting employee travel to try to reduce the disease's spread.


How will COVID-19 outbreaks across the world affect the US?

The US stock market is often pretty robust, even when other economies are struggling.

"The US is not completely insulated, of course, from the global economy, but it's nowhere near as dependent as most people think it is," said Weisbrot, noting that imports only count for around 15% of the US GDP (gross domestic product, the value of all goods and services produced annually).

That means that 85% of what we consume in this economy is made in the US and makes the country less vulnerable to international upheaval.

People may think of manufactured products, "but most of what we consume is services," such as health care or transport, noted Weisbrot.

But US economic policies can determine how much other countries suffer from the coronavirus.

Weisbrot noted that US sanctions against Iran and Venezuela may contribute to the spread of the virus there, noting that in Venezuela "it’s the sanctions that’s keeping this economy from having the basic infrastructure, including water, for people to be able to avoid a public health nightmare."


Is the media just panicking?

On a day-to-day basis, there aren't stories written about the markets having an OK day, so we usually only read about either record highs or scary crashes.

"I got a note today from a reporter saying, 'What are you going to do today to calm the markets?'" Mick Mulvaney, the director of the Office of Management and Budget, said at the Conservative Political Action Conference on Friday. "Really what I might do today to calm the markets is tell people to turn their televisions off for 24 hours."

Weisbrot noted that the focus on the markets by the media was misguided, because "the stock market is not the economy, and it shouldn’t be treated so much as such."

And it's also investors who are panicking.

"There’s a whole psychological component to all of this," said Weisbrot.

Frank Cappelleri, an executive director at Instinet, told the Wall Street Journal the market is being swayed by "human emotions."


How does this affect me, a normal person and non-billionaire?

"The majority of people don't own any stock at all, even in retirement accounts," said Weisbrot. He noted that around 10% of people own around 80% of stocks, so only a small percentage of people -the wealthiest - are truly affected when a stock market crash happens.

A Gallup poll last September found just 55% of Americans own stocks, including in a 401(k) or IRA, the two most common forms of retirement accounts.

Weisbrot also noted that rising stock prices are not necessarily a good thing for everyone, because it may reflect an increase in profits beneficial to a shareholder, but not reflect an increase in wage to a worker at the company.

"The main concern should be actually to public health," said Weisbrot. "The two are related, but if you get the public health part right, the stock market will take care of itself."


Is my 401(k) or retirement savings account screwed?

Retirement accounts are invested in the stock market because historically that's the safest way to ensure that your money grows. But retirement accounts are also usually very diversified -meaning they are split between a wide variety of stocks, bonds, and other investments to ensure they can handle market uncertainty.

Young people in particular should not worry or try to cash out their retirement investment funds, experts said. Because they are built to weather the drops over many years, there is plenty of time to make up for any losses, and taking out money early will ensure a huge loss in compound interest.

"If you’re in there for the long haul, the conventional wisdom is basically true," said Weisbrot.

Plus, it's a good opportunity to "buy the dip" -also known as buying when prices are low.


What's going to happen next?

No one knows yet! A major reason for the market's volatility is uncertainty.

But, stocks go up, and stocks go down, and then, usually they go up again. And on Monday, the Dow closed back up 1,200 points.

So wash your hands, and try to stay calm.

"If it was easy to predict," said Weisbrot, "I would be rich and so would you."

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Putin Celebrates ‘Unprecedentedly High’ Ties with China as Gazprom Seals Power of Siberia-2 Deal
China Unveils New Weapons in Grand Military Parade as Xi Hosts Putin and Kim
Rapper Cardi B Cleared of Liability in Los Angeles Civil Assault Trial
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Druzhba Pipeline Incident Sparks Geopolitical Tensions
Cost of Opposition Leader Péter Magyar's Economic Plan Revealed
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
Budapest Central European Fashion Week Kicks Off
U.S. Celebrates Labor Day
Hungarian National Team Captain Scores Epic Goal
EU is getting aggressive: Four AfD Candidates Die Unexpectedly Ahead of North Rhine-Westphalia Local Elections
Japanese Customer Sways from VW to BYD after “Unbelievable” Test Drive amid Dealership Expansion
Nestlé Removes CEO Laurent Freixe Following Undisclosed Relationship with Subordinate
Pickles are the latest craze among Generation Z in the United States.
Giuliani Seriously Injured in Accident – Trump to Award Him the Presidential Medal of Freedom
Deadline Day Delivers Record £125m Isak Move and Donnarumma to City
Nvidia Reveals: Two Mystery Customers Account for About 40% of Revenue
Woody Allen: "I Would Be Happy to Direct Trump Again in a Film"
Lula and Putin Hold Strategic BRICS Discussions Ahead of Trump–Putin Summit
White House Eyes Budapest for Peace Talks
Cave Diving Beneath the Streets of Budapest
Another American Restaurant Chain Opens in Budapest
Hungarian Opposition Politician Supports Ukrainian Commander
Opposition Leader Threatens Media Outlets
American Airlines Adds New Flights to Budapest
F1 Hungarian Grand Prix Wraps Up
WhatsApp is rolling out a feature that looks a lot like Telegram.
U.S. Trade Representative says Washington still negotiating trade deals after court rules tariffs illegal
Von der Leyen says Europe drawing up 'precise' plans to send troops to Ukraine
Kremlin accuses Europe of hindering Trump’s peace efforts in Ukraine
×