{"id":8937,"date":"2020-03-30T16:42:18","date_gmt":"2020-03-30T20:42:18","guid":{"rendered":"http:\/\/blogs.shu.edu\/thediplomaticenvoy\/?p=8937"},"modified":"2021-06-14T12:27:07","modified_gmt":"2021-06-14T16:27:07","slug":"covid-19-a-plague-on-minds-and-markets","status":"publish","type":"post","link":"https:\/\/blogs.shu.edu\/thediplomaticenvoy\/2020\/03\/30\/covid-19-a-plague-on-minds-and-markets\/","title":{"rendered":"COVID-19: A Plague on Minds and Markets\u00a0"},"content":{"rendered":"<p><strong>Joaquin Matamis<em><br \/>\nStaff Writer<\/em><\/strong><\/p>\n<p>For the past two months, the coronavirus, more aptly named COVID-19, has rapidly spread around the\u00a0globe.\u00a0With an estimated 106,000 people infected and 3,500 dead\u00a0worldwide, a new\u00a0culture of fear and paranoia has supplanted the peaceful start to the new year.\u00a0Among the other devastating effects of COVID-19,\u00a0widespread uncertainty\u00a0has been\u00a0the most damaging\u00a0to the\u00a0international\u00a0community and the global market.<\/p>\n<p>For one, concerns about China\u2019s\u00a0containment efforts led to\u00a0the\u00a0closure of numerous businesses\u00a0and factories, ushering in a sudden supply shock to the world economy.\u00a0These results were\u00a0not unexpected,\u00a0but the complacency of businesses and media at the outset of the COVID-19 outbreaks\u00a0only\u00a0exacerbated and defied expectations.\u00a0Looking to Shanghai, even\u00a0amidst\u00a0empty, inactive streets and Orwellian health checkpoints,\u00a0as\u00a0<a href=\"https:\/\/www.cnn.com\/2020\/02\/20\/asia\/shanghai-coronavirus-china-economy-intl-hnk\/index.html\">CNN<\/a>\u00a0reports,\u00a0some are\u00a0cautiously optimistic.\u00a0Yena\u00a0Lei, a financial industry manager,\u00a0stated,\u00a0\u201cIf\u00a0you look at our stock market, it&#8217;s still okay.\u00a0But the economic situation, I have to say, it will get worse, not immediately but maybe later. Overall, I think this year will not be the year we had expected.&#8221;<\/p>\n<p>Initially, investors\u00a0also\u00a0had the\u00a0same\u00a0mentality regarding the stock market.\u00a0Stock prices began to fall as news about COVID-19 broke out, giving opportunistic investors a chance to\u00a0set up long term investments.\u00a0As\u00a0<a href=\"https:\/\/www.google.com\/amp\/s\/www.nytimes.com\/2020\/02\/20\/upshot\/coronavirus-stock-market.amp.html)\">The\u00a0New York Times<\/a> notes,\u00a0\u201cFirst, they are betting that the Fed can and will act if\u00a0necessary\u00a0should the virus start to do real damage to the economy. Second, if that were to happen, they are betting that the Fed\u2019s diminished capacity to deal with future shocks won\u2019t be a problem.\u201d\u00a0This statement comes even\u00a0with the high risk of the stock market\u00a0and future, unforeseen\u00a0disaster.<\/p>\n<p>As\u00a0more news about the virus\u2019s spread broke out\u00a0on the week of February\u00a023,\u00a0announcements from different corporations including Apple,\u00a0the International Air Travel Association, and\u00a0Daimler (Mercedes-Benz)\u00a0induced\u00a0widespread panic and anxiety\u00a0among consumers\u00a0and investors\u00a0alike.\u00a0<a href=\"https:\/\/www.google.com\/amp\/s\/www.nytimes.com\/2020\/02\/21\/business\/coronavirus-global-business.amp.html\">The New York Times<\/a>\u00a0also\u00a0adds that Chinese central banks\u00a0reduced their\u00a0rates, lowering expected economic growth and\u00a0dissuading investors from spending.<\/p>\n<p>Business sectors in the\u00a0hospitality and travel industries\u00a0are suffering the most\u00a0as a direct result.\u00a0Diane\u00a0Swonk,\u00a0a\u00a0chief economist at\u00a0Grant Thornton, told\u00a0<a href=\"https:\/\/www.google.com\/amp\/s\/www.wsj.com\/amp\/articles\/coronavirus-risk-rises-for-u-s-global-economies-11583528339\">The Wall Street Journal<\/a><u>\u00a0<\/u>\u201cWorkers can\u2019t all work from home, and you\u2019ll see lost output that can never be made up. You can\u2019t attend a canceled sporting event later and you won\u2019t buy a sweater you wanted in March in late April.\u201d<\/p>\n<p>As a result of the virus\u2019s effect on businesses, unemployment could rise in the short term with continued soaring prices,\u00a0planting the seeds for a cycle of stagflation at the macroeconomic level.\u00a0Airlines grounding more flights, businesses canceling overseas conferences, and more workers on unpaid leave represent only a handful of symptoms to a greater economic issue.<\/p>\n<p><a href=\"https:\/\/www.google.com\/amp\/s\/www.cnbc.com\/amp\/2020\/02\/19\/coronavirus-morgan-stanley-economic-forecasts-for-chinas-growth.html\">CNBC<\/a>\u00a0reports Morgan Stanley\u2019s prediction at a drop to 3.5 percent in China\u2019s first quarter, indicating an even slower return to normal production and manufacturing. More realistically, economic growth may only drop to 4.4 percent by more optimistic estimates, but this hasn\u2019t stopped the market from reacting. On February 27, the Dow Jones saw its largest daily point loss at \u22121,190.95 or &#8211; 4.42 percent. The following week, the Dow Jones still saw drops at \u2212969.5 or -3.58 percent, according to <a href=\"https:\/\/www.google.com\/amp\/s\/www.cnbc.com\/amp\/2020\/03\/05\/stock-market-today-live.html\">CNBC<\/a>.<\/p>\n<p>To understand the severity of today\u2019s crisis,\u00a0Seema Shah, a chief strategist at Principal Global Investors, told\u00a0<a href=\"https:\/\/www.marketwatch.com\/story\/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22\">MarketWatch<\/a>\u00a0three important factors that have impacted people\u2019s perceptions and decisions in the economy. For one, the social media-driven news cycle has benefited greatly from stirring fear\u00a0and distress among people, profiting from\u00a0superfluous or otherwise\u00a0exaggerated\u00a0stories.\u00a0Secondly, an excessive focus on the stock market has not only made shares pricier but has also taken away from the main narrative of COVID-19\u2019s spread and prevention. Finally, the increasingly interconnected nature of global supply chains\u00a0creates an unavoidable domino effect in all sectors.<\/p>\n<p>Despite the troubling circumstances, this crisis has a silver lining. To combat an economic downturn, people and investors alike must be reassured\u00a0that the markets will return to\u00a0normal.\u00a0\u00a0Statistically speaking, the world\u00a0has\u00a0recovered quickly\u00a0from similar pandemics\u00a0in\u00a0the past. According to\u00a0<a href=\"https:\/\/www.marketwatch.com\/story\/heres-how-the-stock-market-has-performed-during-past-viral-outbreaks-as-chinas-coronavirus-spreads-2020-01-22\">MarketWatch<\/a><u>,<\/u>\u00a0epidemics within the past 30 years have\u00a0seen market returns of 8.50 percent within six months. Even\u00a0within three months, market returns are at an average of 3.08 percent.\u00a0As more people became less concerned about the virus during the week of Super Tuesday, the Dow Jones spiked up to 1,170 points or 4.5 percent.<\/p>\n<p><a href=\"https:\/\/www.cbsnews.com\/news\/super-tuesday-stock-market-up-joe-biden\/\">CBS News<\/a>\u00a0also reported that the market\u2019s reaction reflected well against the U.S.-proposed $8.3 billion package for COVID-19 relief.\u00a0All in all,\u00a0if\u00a0government spending and decision-making are effective and media outlets highlight the important aspects of the crisis,\u00a0global health efforts will not only physically heal those inflicted with the\u00a0virus but\u00a0put people\u2019s minds at ease as well.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Among the other devastating effects of COVID-19,\u00a0widespread uncertainty\u00a0has been\u00a0the most damaging\u00a0to the\u00a0international\u00a0community and the global market.\u00a0\u00a0<\/p>\n","protected":false},"author":5094,"featured_media":8938,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"colormag_page_container_layout":"default_layout","colormag_page_sidebar_layout":"default_layout","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1888,1354,382,1862],"tags":[619,1868,1887],"class_list":["post-8937","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-march-2020","category-world","category-international-news","category-1862","tag-economy","tag-coronavirus","tag-covid-19"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - 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