Market Panic!-What can you do?

As millions of people across the country continue self-quarantining and practice social distancing to slow the spread of the COVID-19, the amount of anxiety and concern is very much palpable in people’s faces, and understandably so. Stock market investors have been on a selling spree resulting in the biggest one-day decline since 1987; the same way shoppers rushed to fill up their pantries with weeks’ worth of food supply and toilet paper causing a shortage in some places.

While these events continue to evolve, major news outlets and conspiracy theory groups have been busy competing for our attention with frightening headlines to accumulate reads, likes, and shares, then viewers are passing along all sorts of misinformation to family and friends causing even more emotional strain or even physical harm. A recent Pew Research survey found that almost half of the people have seen at least some fabricated news about COVID-19, and 29% even think the virus was created in a lab. These significant displays across many sectors of our society reflect one thing: the uncertainty of the impact the coronavirus will have in the long-term.

Although it is common for economic and political analysts to rely on historical data to forecast future behavior, one important factor we need to realize is that no crisis is ever the same as previous ones. The 9/11 attacks differed from the 2007-08 financial crisis, as this has differed from Hurricane Katrina in 2005, and it differed from hurricanes Charley, Frances, Ivan and Jeanne in 2004. Over the past few weeks, the public has been bombarded with statistical projections, suggestions, expert opinions, and “expert opinions” for how this crisis will turn out. The reality is that most of these indicators are only effective at helping us evaluate and gain perspective on the current situation and choose the most practical strategy going forward. Unfortunately, the rest of these news headlines and social media posts are not-so-useful speculations mostly aimed at irritating the emotions of an already tense society.

The most helpful, yet difficult, option we have is to grasp what the realities are:
  • According to the World Health Organization, the coronavirus disease (COVID-19) is a new strain of viruses discovered in 2019, and it had not previously been identified in humans. Early cases of COVID-19 are believed to be linked to a live-animal market in Wuhan, China.
  • At the time of this writing, there are at least 400,000 diagnosed cases worldwide and 20,800 coronavirus related deaths. More than 113,000 people have recovered from the virus, according to data compiled by the Center for Systems Science and Engineering at Johns Hopkins University.
  • In the United States, over 60,000 diagnosed cases have been confirmed with at least 800 deaths. So far, over 300 have recovered from the virus.
  • As hospitals continue testing for the virus, the number of cases is expected to increase as more people get tested. As a result, some states are acting quickly by mandating various types of orders for people to stay home.
  • These measures are being done to flatten the rate of infections over time and prevent a steep increase which could cause a significant strain in the healthcare system.
  • It is expected that U.S. government officials will continue to put in place such measures at the advice of health care and pandemic experts until the rate of infections begin to stabilize or decrease as it is currently happening in China, where the virus originated, and South Korea.

It is very clear that these actions are having a significant negative effect on various sectors of our economy. Employers have sent their staff to work from home to comply with government guidelines, and more crucially, millions of employees are being laid off as various industries have gone to zero revenue in a matter of weeks. In the middle of this confusion, market observers have seen it as a sign of some relief that the federal government is in the process of intervening and plans to prop up consumers, companies, and local governments by quickly approving legislation to provide tax rebates to individuals and increase unemployment benefits. These aid packages will also provide loans for businesses, the airline sector, and other distressed areas of the economy.

There should be no denying that this is and will continue to be a challenging phase for our society. However, one variable where most experts’ views seem to differ, is the duration of the economic impact. Whereas some claim that these events will have a long-lasting and catastrophic effect like the 2007-08 financial crisis or worse, others deny this view by asserting that the current market panic is not due to weaknesses specific to the U.S. economy, such as the mid-2000’s housing bubble, and this time the bad news came from something outside the economy.

These conflicting arguments will continue until we eventually start to see improvements in the number of cases, and governments begin to lift restrictions on businesses and individuals. Until then, our most reasonable option is to be informed on the actual significance of this situation, but at the same time realize that no expert, nor “expert”, can foresee the future with certitude.

In finance, fear is considered an ever-present aspect, from the most experienced and successful investment institution to the personal level. The fear currently sensed when turning on the TV or scrolling through our news feed is a legitimate feeling, we all experience it mostly due to the uncertainty and the little control we have as individuals at ending this disease. Although fear is a genuine response in difficult times, the safest strategy would be to match our fear to the extent of the circumstances; unrestrained fear will cloud our judgment and push us towards irrational financial decisions. Share on X

Obviously, throughout the development of this crisis, individuals will continue to experience anxiety about permanently losing their jobs, retirement, paying their mortgages and credit card balances. It is important to realize that as a country, there’s only so much every one of us can do here, and a lot that we cannot control. Yet, how we react to this will have an immediate impact on us and our loved ones.

In terms of what we can control, there are items we can start considering today regarding our personal finances:
  • The first thing you can do is look at your upcoming expenses and identify the essential items you need to cover as well as the non-essential items that can be deferred or put off in order to get a sense of what your cashflow needs are.
  • See how much cash or ability to cover those expenses you have and for how long. If you lose your job, consider what your unemployment insurance will look like and what other sources of income you may have.
  • If necessary, reach out to your credit card issuer, bank or mortgage company to see what options are available for skipping a payment or seeing a reduction in interest rate.
  • Look into the special 90-day window that allows you to pay your federal income tax bill by July 15, instead of April 15. (for those who can’t file by April 15, everyone is eligible to request a six-month extension to file the return. If you are owed a refund, make sure to file your return as soon as possible.
  • Employees with 401(k) plans: maybe not looking at your 401(k) balance every hour is the most beneficial move you can make at this point. During the last few weeks, the markets have entered a stage of panic due to the uncertainty of the coronavirus. Especially if you are not expecting to retire soon, it is best to let it ride out the storm. The extreme market volatility has caused major indicators to become irrational and therefore not predictive of future performance.

As we get through these difficult and uncertain times, we must keep reminding ourselves to focus on the things we can control. Following local officials’ health and safety guidance has to be a common priority for our well-being and our families. It is just as vital to stay informed on the initiatives federal and local governments are taking to lessen the burden on the most vulnerable. This brings a point that we can all be certain of, there will be a surge in overall need; not only in the most vulnerable regions around the world but also in people close to us, relatives, neighbors, coworkers. Like in previous crises, times like these create a shift in priorities, and this could be a time to dust off and use the best qualities we can exercise as humans.

Our society has been hectic over the past decade trying to catch up with ever-evolving technologies, trends and various sorts of swift consumerism to the point that as of last month, we were able to easily shop for clothes, make a doctor’s appointment, book an airline ticket, make a reservation at the best-rated restaurant in the area, and have groceries delivered to our door without having to speak a single word to a human; all while laying on the couch and streaming the latest TV series.

Just like the COVID-19 vaccine will surely be in high demand when available, human relationships, acts of selfless kindness, and generosity without a hidden agenda will also be desperately needed by our communities more than ever. Share on X The good news: these resources are abundant, and we won’t have to rely on government officials and experts to deliver them. Enjoy!


José Daniel Diaz, a contributor to this blog, is a University of Central Florida graduate with a degree in accounting and finance. JD works in New York as a Risk Analyst for a prominent international bank. His expertise is on treasury operations and financial risk management. JD is an avid reader of and

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