The Ripple Effect of Coronavirus: How it’s Impacting the Economy and YOU
The Coronavirus is terrifying many as case reporting continues to rise. But with a 3% mortality rate and a recovery time of about two weeks, medical experts predict most will be fine. While that sounds promising for the population, the economy may not win the battle with the coronavirus. On Monday, March 9th the Dow Jones suffered its worst one-day fall, dropping by 2,014 points or 7.8%, as results of coronavirus fears of a global pandemic. Meanwhile, the S&P 500 index dropped 8% and closed at 7.6% lower, which is another worst since December 2008. In the opening minutes, it tanked 7%, triggering a New York Stock Exchange “circuit breaker” that halted trading for 15 minutes. The long-term effects of the virus and how quickly it spreads are still unknown, which has caused uncertainty in consumers. Businesses, investors, and most people do not like uncertainty, which leads to restrictive spending.
This extreme drop has caused many to revert to 2008 tactics such as hoarding money & necessities, which lead to the Great Recession of 2008. Though this may sound frightening, remember, we are due for a bear market. The government is taking action against the concerning health issue. President Trump stated that the White House would unveil “very dramatic” proposals to help protect the American economy from the coronavirus, including financial help for workers who don’t get paid sick leave, tax cuts and targeted relief for industries battered by the virus, including cruise lines, airlines, and hotels. This may elevate the economic stress of many who are forced to spend less because of coronavirus. On the flip side, federal borrowing costs have fallen very low, which may seem like a good thing—and it can be. But for the long-term economic health, it could mean danger. Retirees will feel the negative effects through the interest on their retirement accounts.
Three major US export countries, China, Japan, & South Korea, have been seriously impacted by Coronavirus through city-wide quarantines and production halting. Eventually, this can cause purchase rates of US products to decline and in turn potentially causing unemployment to rise due to the decrease in demand. Employees of many trades will be affected including automotive and technology. Another large economic contributor may see a hit as Saudi Arabia is ramping up oil productions, which has already decreased gas prices in the US. This raises threats of layoffs because American oil companies may not be able to keep up with the low pricing from Saudi Arabia, thus potentially creating an oil price war.
As many of us have witnessed, Coronavirus is encouraging many to avoid contact with others. While this may seem harmful, it is already hurting the travel, entertainment, and hospitality industries. As of March 11th, airline flights to LA, Denver, and Puerto Rico have dramatically decreased from the norm. A nonstop flight from EWR to LAX is going for $177 with United Airlines, which is at least $100 under average. Norwegian Air canceled 3,000 flights Mid-March to Mid-June and plans to lay off due to coronavirus. Popular US airlines may follow if the population continues to self-restrict travel.
While it may sound counterintuitive, don’t panic. Instead, take proactive measures to prevent widespread loss on your finances. You can do this by reviewing your current strategies and portfolio with an experienced financial professional. This can help ensure it’ll tough through the effects of the coronavirus and inevitable upcoming bear market. At RGA, we offer complimentary second opinion analysis to determine if your retirement strategy and tax reduction plan is prepared to last through the potential approaching financial disaster. Schedule your FREE virtual financial strategy session in the comfort and safety of your home and we’ll review your retirement strategy and current tax situation to potentially help prepare it for the inevitable disastrous impact of the coronavirus by clicking the link below, calling 1.800.467.8152 or email firstname.lastname@example.org.
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