Economic Opinion and Coronavirus UpdateMarch 18, 2020
By Jeremy Reif, CRPS®, Financial Advisor and Owner of Point Wealth Management
Fears have escalated around the COVID-19 “Coronavirus” as the W.H.O. now is calling it a “pandemic”. The word, pandemic, alone instills fear. For my clients, family, friends or people you might share this with, I still stand by and believe in what I’ve said all along, the media has blown the news about the Coronavirus out of proportion.
To put things into perspective. Thinking about the media, over the last 5-10 years as news ratings drop because of increasing news sources made available by print, tv and online (it goes without saying, but some reliable and others not). Positive news does not gain as much traction or the ratings as it once did. Positive news is usually drowned out by too much noise ie. social media, sites like YouTube, etc. Unfortunately, the only thing that seems to drive ratings and to get people to watch or read the news is FEAR.
Each network wants to be the first to report on any breaking news to boost ratings. Media response today are who cares if the information is wrong. Gone are the days of investigating first and get the facts because you will be the last to report. If the media is wrong, in 2 weeks they will post their retraction and it would be more than likely buried in some other non-relevant article. That has become the new acceptable standard.
The C.D.C. and the W.H.O. do not have enough factual information right now to give us good guidance about the Coronavirus. The only useful tips are hygiene, which we should be doing anyways (wash your hands, don’t touch your face, cover your cough etc). They are more focused on trying to slow how quickly this is spreading by flattening the curve. Which I will explain a little further down. Furthermore, I have not seen anything reported by the C.D.C or W.H.O. on the following:
1. Can a person get the Coronavirus more than once?
2. Will we build up an immunity to it?
3. Would these same individuals that have unfortunately passed away from the Coronavirus, what would have been their probability of death if they would have contracted influenza?
4. In addition to the Coronavirus, do we know how many viruses are out there that have been floating around all along and kill people that do not have a name?
I digress here, but couldn’t help it….
5. How about a conspiracy theory idea that we may have seen in the movies?
What if there was a “bad guy” (government, terrorist cell, scientist, individual) like in the movies that hates the USA. Instead of crashing a plane into a building or blowing something up, they had some top-secret information about this “new” virus and burned/buried some critical information about it. Then got the idea to short the stock market and then put a plan in motion.
Step by Step:
A. Leak the virus in a large populated area
B. Leak some critical information about the virus so the world can name it
C. Instill fear and mass chaos to the media knowing that they are going to alter the global economies and markets?
D. Make large sums of money for funding future bad guy endeavors.
E. Plan something bigger
From an economic and financial perspective: Governments around the globe have stepped up quickly and much more proactive than our banking crisis in ’08-09 recession. Here in the US, the federal reserve lowered interest rates on March 3rd and also put together a package March 12th to inject capital ($1.5 Trillion) back into our banking infrastructure. England March 13th upped their capital injection from a relatively small amount now to $1T and have also lowered their interest rates as well. These are a positive for our US and Global economies. This should dampen the blow by a fear driven market to help keep the economies strength not necessarily the stock market.
The only thing that could have been done better for the economy was having our governments/countries quarantine the virus before it had spread.
The US is putting things in place and being overly cautious to make sure that we do not have continued mass chaos. We are trying to flatten the curve to get this under control. Flattening the curve, is slowing down how quickly the virus spreads so we don’t have an issue like Italy or China of mass outbreaks. The idea behind this… Right now, around the world we are in the middle of flu season. According to the W.H.O global flu infections were estimated 3-5M cases and 290k-650k deaths. According to New York Times, the Coronavirus death toll globally has just surpassed 5000.. Again, why are we so focused on Coronavirus and not Influenza? This again is the media and fear of the unknown!
Hospitals right now are relatively full around the world right now from regular illnesses and influenza. For example, now add 12k new cases of a Coronavirus to Italy and their first reaction is that everyone needs to go to the hospital. There are not enough hospitals, beds to treat everyone, shortages of facemasks, doctors, nurses etc. People then get turned away and facilities are then to pick and choose who they treat or turn away. Flattening the curve is trying to avoid what has been happening where there has been mass outbreaks. If we can’t contain it, we must try to slow down how quickly the virus spreads. The hope and thoughts are we then will have more space available and an ability to treat significantly more people than if everyone was infected at once.
Right now, the precautions sound a little over the top by cancelling sporting events and large group gatherings, but equally necessary to slow the rate or spreading the Coronavirus. This does come with some pushback. For example, major cruise lines and their ships have shut down for 60 days. Now people might be out of work for 2 months and have a ripple effect (not clear on if they will get paid during this time off). What about the vendors that supply the trinkets or food, they now lose out on revenue or work for 2 months as well. in addition to this, large companies don’t report their earnings immediately, they tend to delay by 3-6mo. We will hear their financial damage that was done this spring by mid-summer or early fall. Earning reports especially hearing negative news like this always seems to drive the markets lower, even if we are in anticipation of it.
2 weeks ago, I would not have thought this, but fear has had a much larger effect than I initially thought. The stock market has been on a 10+ year bull run. Looking at all the data, the economy and markets were already slowing down from their peak growth rates, here in the US and globally. This virus caused slowdown and government intervention of trying to isolate people, reduced/stopping international travel, closing businesses and group events could potentially slow us to the point and potentially even cause a recession. If it does reach recession stage, in my opinion I do not think this will be of the long drawn out variety type of recession.
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ABOUT JEREMY REIF, CRPS®
Jeremy Reif is an independent financial advisor with more than a decade of experience in the financial services industry. He is also the owner of Point Wealth, LLC, an independent financial planning and investment management firm. With advanced credentials and training in retirement planning and financial planning, Jeremy specializes in helping individuals and families pursue financial independence. Regardless of the services he’s providing, he focuses on talking openly about financial planning, the industry, common questions about retirement planning, and more to help everyday investors gain more confidence in their financial opportunities. Based in Wausau, Wisconsin, Jeremy serves clients throughout the state and can work virtually with clients throughout the country. To learn more, visit http://pointwealthmanagement.com and connect with Jeremy on LinkedIn.
Investment Advisory Services offered through Retirement Wealth Advisors, (RWA) a Registered Investment Advisor. Point Wealth Management, RWA, WEG are not affiliated. Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Securities offered through World Equity Group, inc. Members FINRA and SIPC.