A B.C. business economy professor is warning people to be patient as the stock market shoots up and down as the COVID-19 crisis continues.
James Brander, a professor at UBC鈥檚 Sauder School of Business, said it鈥檚 a guessing game as to how long this crisis will last.
鈥淥bviously there鈥檚 a lot of volatility right now,鈥� Brander told Black Press Media by phone.
鈥淎ny piece of good news will send the markets up and any piece of bad news will send the markets down.鈥�
That may be an understatement. On Monday and Tuesday, plunges in major stock markets in both Canada and the U.S. led to 15-minute pauses in trading, something Brander said is called a 鈥渃ircuit breaker.鈥�
Part of the reason behind the breaker is that these days, a lot of selling and trading is done by programs that don鈥檛 pause to think.
But the other part of the market uncertainty is caused by the COVID-19 pandemic, with more than 600 confirmed cases in Canada, as well as eight deaths, mostly in B.C., as of March 18.
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Brander said the mix has caused a market situation even worse than the ones created after 9/11 and the 2008 financial crisis.
Brander, who spoke prior to the border closing between Canada and the U.S., said he hoped defined policies, rather than uncertainty, from the American and Canadian governments would stabilize things.
However, major U.S. stock indexes closed sharply lower on Wall Street Wednesday as fears of a prolonged coronavirus-induced recession took hold. The S&P/TSX index in Toronto fell 7.6 per cent, and the loonie dipped under 70 cents U.S. for the first time in five years.
Brander said the only real way to deal with the market situation is to wait it out.
鈥淚n the long run, I think the markets will come back. But don鈥檛 ask me how long I think the long run is,鈥� he said.
If he had to guess? 鈥淥ne to three years.鈥�
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No one, he said, will really know the answer to that until the novel coronavirus pandemic reaches a peak and infections and deaths begin to slow. As of Wednesday, March 18, the global case count is over 191,000, while the death toll is over 7,800.
Financially speaking, Brander said, the biggest losses will come to pension funds, with people who have personal savings invested in the market a close second.
鈥淎nd a lot of people of course have pension plans and in addition they have some of their own savings,鈥� he said. 鈥淭hose people have been really hit.鈥�
Brander鈥檚 advice to those people? 鈥淗ang in there while you can.鈥�
The benefits rolled out by Ottawa Wednesday should make that easier.
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An unprecedented $82 billion financial-aid package announced earlier in the day will beef up Canada Child Benefit payments for families and GST tax credits for low- and middle-income earners, provide a wage subsidy for small businesses to help them keep staff on the payroll during the slowdown, pause Canada Student Loan payments for six months and establish emergency benefits for people who don鈥檛 qualify for employment insurance. Mortgage payments have also been deferred for six months, while those who owe taxes can wait till August to pay them.
If pulling out of the market right now is the wrong call, going all in at the bottom could be, too 鈥� especially if you鈥檝e got bills to pay, and not too much financial cushion.
鈥淚 don鈥檛 think those kind of people should take risks, any more than they should walk into a casino and start putting big bets on the roulette table.鈥�
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