The 101 on Coronavirus and your money

Coronavirus has taken the world by storm. Some of us are worried about office & campus shutdowns. Some of us are online shopping for sun hats for the island trip we just booked for $100. We get you on both. Here’s what we’re hearing is on your minds.

Q: Coronavirus is a health issue so why is the stock market on a rollercoaster?

The 101 on what “the markets” do?
Markets are bets on the future and how risky the future is. All stock prices are guesses as to where the economy and individual companies within it WILL go. So, in a COVID-19 world, all bets are off on how uncertain the future is.

Last Monday the stock exchange STOPPED trading for 15 minutes. More than a rollercoaster, it was a circuit breaker. Circuit breakers happen when the stock market falls 7% (also happens at 13% and again at 20%). The stop is to FORCE investors/traders to pause and reassess the situation.

How did the markets reach a circuit break? Anxiety about the unknown virus began in February and has been growing. Here’s why:

1. Business Disruptions

Supply Chain Disruptions: Any company with business in China has been impacted with factory closures and travel restrictions. No/low inventory (typically from China) to sell or to use for production means you don’t meet 2020 sales goals. Coronavirus has disrupted the supply chains of 75% of U.S. companies.

Travel Shutdowns: Airline stocks have taken a hit since no one is flying. Airlines are waiving cancelation fees and stopping routes completely to affected areas, negatively impacting profits. The virus will cost the airline industry about $113 billion.

Restaurant Closures: People are eating out less, causing restaurant business to suffer. Plus, less people in restaurants → need less ingredients → food suppliers (like farmers) also lose business. The impacted chain is long.

2. Selling Spree

When you worry about something, you get out of it. Given all the uncertainty, investors want to “get out” of the stock markets. Massive sell offs lead to even lower prices.

3. Investor Sentiment

“Investor Sentiment” refers to their general ~vibe~. Current vibe: not so confident.

The Fed recently cut interest rates (what it costs you to borrow) to encourage people to spend (ie. boost the economy). Didn’t work out the way the Fed intended — instead of boosting confidence, people took it as confirmation that things are bad.

Q: I’m young. What is the lemon-to-lemonade opportunity here for me?

If you have invested:

Keep calm and stay invested: you have all the time in the world to ride out this wave.

Remember: current “value” of your investments have gone down, but it’s just a moment-in-time snapshot. No money has been lost unless you sell your investments while it’s in this trough. Markets recover from meltdowns. Maybe not this month or even year, but certainly over 5-10 year periods.

If you have never invested:

Would you rather buy the jacket when it’s 70% off or when it’s at the height of popularity? Same for investing.

Stocks are on fire sale prices so investing is a smaller financial outlay (EX: you can start a small portfolio for $500 when it would have cost $1000 a year ago).

As the economy recovers in the coming years, you’ll be “IN’ the market and riding that wave up.

HOW do you actually begin? Here are some specific moves to start an investment account, some as easy as downloading an app.

Others tell you to wash your hands 20 times an hour. We’ll tell you to moisturize your hands after bathing them in antibacterial soap that often. In these and all ways, we are in your corner!