Fear Leads to Economic Disruption

By Judy Loy 
Registered Investment Advisor, ChFC® and CEO of Nestlerode & Loy, Inc.

Store shelves are clear of toilet paper and hand sanitizer. In one day, the stock market drops 900 points then goes up 1,000 then ends the trading day down again. “Wheel of Fortune” and “Jeopardy” are taping without studio audiences. The Federal Reserve makes a surprise rate cut. Penn State is one of many universities that shut down face to face classes. Italy has a national quarantine for the first time since  World War II. 

It’s all because of COVID-19 (once someone told me that rhymes with “Come on Eileen,” I can’t get that out of my head), the disease caused by the novel coronavirus. Never heard of it? Well, possibly you have been living under a rock. The first confirmed case was in China in December 2019. I am not, nor will I ever be a doctor, so I will stick with the markets and the economy in this article. Certainly, human value is far above economic value and that is why we are sacrificing economies by limiting exposure through closing schools and canceling sporting events.

For our local economy, it can mean quite a shock. The best estimate of Penn State’s contribution to the State College Borough is 60% of its economy. With the lack of students, incoming tournaments and activities, downtown’s businesses will lose much of their revenue. The local, small businesses depend on this for their lifeblood. I suggest we all take some time to visit downtown and have some tea or beer at a local establishment. Maybe the borough should suspend paid parking to help these businesses (hint, hint).

The stock markets have officially dropped 20%, which signals an intermediate bear market. It was a quick drop and we are now at oversold levels. The first sectors that look to recover are healthcare and technology, but the markets will remain volatile until the virus abates. With the measures being taken, the virus should not spread as quickly, which is good for healthcare workers and care facilities.

If you are concerned about your investments, talk with your advisor. When things move down this quickly, it is best to stay put because you could literally sell at the wrong time. Always look at your own situation when evaluating risk. Right now, if you have cash for investing, it is an opportunity to get quality companies inexpensively. If you have cash for expenses or income, stay put and keep your safe money safe.

I suggest remaining calm and lots of Netflix, and hope that you and your families are safe. The markets have been through worse economic threats and have recovered.  

Nothing contained in this article should be interpreted as a promise or guarantee of earnings or investment results nor a recommendation for the purchase or sale of any security or sector.