How the Coronavirus Can Affect the Economy and Your Investments
The coronavirus has taken over most news and media outlets. Its impact can be heard and seen around the world and for good reason. This widespread outbreak has caused concern among consumers due to the increasing death toll and infection transmission rate.
As of March 3, 2020, the World Health Organization (WHO) announced that over 90,000 people have been officially diagnosed with the coronavirus throughout the world. The death toll in the U.S. rose to nine. The WHO stated there are “new estimates suggesting the disease was far more lethal overall than previously suspected.”
With such alarming numbers that increase by the day, consumers, corporations, and government officials are voicing concerns over the virus’s effects on the global and local economy. Since it’s such a unique and ever-changing virus outbreak, some of these effects are unknown and left to speculation. Understanding how your personal budget and investments may be affected by the coronavirus outbreak ensures you’re prepared for the worst.
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Although the coronavirus is still new to the world, it’s already showing grave impacts on the global economy. The fast-spreading nature of the virus has caused concerns among big corporation owners and global business owners.
The outbreak started in China, which is the manufacturing capital of the world. When the virus began spreading and showed how aggressive and threatening it was to the world, many Chinese manufacturers and factory owners shut down or slowed production. This decreased or ceased production negatively affects the global supply chain and may be responsible for the declining growth that suppliers around the world are facing.
Large corporations, such as Apple, are expecting their production to slow and decline due to Chinese factory shutdowns. Many technological products and parts come from these Chinese manufacturers, making it hard for technology companies to keep up with production. This decreased production and effects on the global economy could take months to recover from, depending on how the virus behaves in the coming weeks.
Conventions and conferences are what keep many cities and businesses thriving. With concern around the coronavirus and the warnings about how fast the virus spreads in groups of people, many large conferences and conventions are being canceled, including the:
- Facebook Global Marketing Summit in San Francisco;
- Google I/O Conference in Mountain View;
- Bologna Children’s Book Fair in Bologna, Italy;
- Mobile World Congress in Barcelona, Spain;
- Natural Products Expo West in Anaheim.
The cancellation of these trade shows, conferences, and conventions has negative financial impacts on several industries. Venues, caterers, travel providers, and hotels are bound to experience adverse effects due to these cancellations.
Consumer Behavior Impacts
The way consumers react to the spread of the coronavirus also has impacts on the global economy. Many consumers are curbing their travel plans and summer vacations due to the virus. It’s been confirmed that the coronavirus is easily spread through germs in human droplets from sneezing or coughing.
Crowded places or foreign destinations have become a source of anxiety for many consumers. Therefore, they’re avoiding traveling and canceling current travel plans. When consumers stay home and don’t spend money, the economy and stock market directly feel the effects.
If your investment strategy includes the stock market or other investment vehicles directly affected by the global economy, it’s easy to worry. Changes in automobile and home sales, decreased tourism, and a slowing entertainment industry have direct impacts on the stock market.
On March 3, 2020, the Dow Jones Industrial Average closed the day down 786 points, which is extremely concerning for investors. However, the Federal Reserve is quickly taking action to ensure the economy remains stable.
The Federal Reserve cut the U.S interest rate by half a percentage point to encourage consumers to continue spending. This is the department’s attempt to keep the country’s financial and investment outlook positive. The U.S. interest rate decreased from 1.75% to a little below 1.25%.
Your retirement investments are your long-term investment strategy. If you’ve already invested money in the market and you’re not worried about what to invest in now, your best bet is to leave your retirement investments alone. Since the stock market is experiencing volatility, the worst move is to attempt to pull out your investments.
Retirement investments usually only pay off if you display patience and give them time to grow. At this moment, your retirement investments may not look too promising. The negative effects of the coronavirus on the economy are widely evident in the stock market. However, if you can keep your money where it is and wait for the economy to rebound before attempting to move or take out your investments, chances are your money will still show growth in the long term.
The outbreak of the coronavirus has put the global economy in a unique and unpredictable situation. Factors such as how long the stock market will continue to fall and how widespread the virus will become are all unknown. This makes the market extremely uncertain, causing consumers to worry about the health of their finances and investments.
There are a few ways you can be proactive about protecting your investments from the negative financial impacts of the Coronavirus, including the following:
- Stay on budget: One of the best ways to ensure you remain financially stable is to set a budget and adhere to it each month. By remaining on budget, you can keep your household thriving, no matter what happens with the economy.
- Make calculated financial moves: It’s tempting to make big moves right now since the economy feels unstable. However, this can disrupt your financial plan and set you off course quickly. Analyze your financial moves before you make them to ensure they’re in your best interest first.
- Focus on long-term investments: Short-term investments are experiencing volatility in the market. If you adhere to your long-term investment strategy, it’s more likely that the economy will improve and your money will grow.
- Stay calm: If you panic about the negative effects the coronavirus is causing in the global economy, you could make rash and irrational financial decisions. Remain informed but stay calm and optimistic about the future and your investments.
The unpredictable nature of the coronavirus has impacted the global economy, which may, in turn, affect your investments. By staying calm and sticking with your long-term investment strategy, you may reduce the financial impacts this virus could have on your retirement plans.
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