Coronavirus: How Will It Affect The Economy?

2024 Author: Steven Freeman | [email protected]. Last modified: 2023-12-17 08:15

The effects of the coronavirus are wreaking havoc worldwide, and not only in terms of health. The emergence of this mysterious disease that erupted in Wuhan, China, has already crossed the borders of the Asian giant to infect thousands in at least 47 countries.

The impact of the coronavirus has also been felt in the world economy, which for the third day -until this Thursday- showed a marked financial decline, with the three main indexes presenting losses in the worst financial week in the United States since the 2008 financial crisis.

Logically, this will affect everyone's finances on an individual level, especially retirement accounts like the 401K. To explain the subject, we turned to Carlos García, a graduate of the prestigious Massachusetts Institute of Technology (MIT) and founder of the FinHabits app, to talk to us about it.

What are the factors that will determine the consequences of the coronavirus in the economy?

In my view there are three factors that will determine the economic impact of the coronavirus. The first is how far the virus will spread on the planet and how long it will take to find a vaccine; the second factor is the reaction of investors to the uncertainty it is causing; and the third factor is the reaction that the governments of the different countries may have to contain the virus and boost economic growth.

Should we be concerned as consumers and investors?

My experience in the industry tells me that the economic impact of coronavirus is likely to be short-lived. However, the investment philosophy that I manage at Finhabits is to put your money to work in diversified portfolios. A diversified portfolio helps you reduce the risk in your investments and participate in the growth of global economies. In my opinion there is no need to be alarmed when the stock market changes due to events like this.

The Costa Smeralda cruise. The tourism industry has been affected by the epidemiological outbreak of the coronavirus:

Have similar cases occurred with viruses in the past?

We have already experienced similar events in the past. Generally when the stock market falls, it is followed by a rapid recovery. This is considered a "V" shaped impact on the markets. The investor tends to overreact because he does not like uncertainty. An example is what we experienced when President [ Donald] Trump started the trade war with China. Back then the market fell and then rebounded.

What are your recommendations?

I always recommend having a long-term investment plan. If you have not started investing today, it is always the best time to do so. I invite you to explore the different options of the Finhabits app to invest in the stock market.