Coronavirus Causes Market Decline

             During the week of February 24, 2020 to February 28, 2020 the international stock market saw the largest decline since the financial crisis of 2008.  The S&P 500 fell nearly 11.5%, the worst it has been since the 18% drop off in October of 2008.  This significant drop is assumed to be due to the Coronavirus which has effect primarily China and is now spreading around the world.  As the virus continues to spread, countries will begin to restrict their borders in an effort to avoid the spread of the virus to their country.

             The market sell-off was done by many investors in preparation of what they believe will be an inevitable loss of profit due to the outbreak of the virus.  As it spreads, more cities may be closing their borders to trade and shutting down their offices and schools.  Hong Kong has already begun to take such measures, shutting down their public schools in the wake of the outbreak.  Although they had already been closed due to the ongoing protests, their scheduled reopening was pushed back to protect the students and teachers from contracting and further spreading the virus. 

             As the virus continues to spread, more countries may take similar measures to Hong Kong and shut down their government centers and eventually borders.  In preparation for these measures, many investors sold off their shares in companies that operate globally; nearly every company is impacted globally even if they do not participate in the market directly. 

             The Federal Reserve Chair, Jerome H. Powell, issued a statement to ease the minds of investors, stating that the central bank will “act as appropriate to support the economy.”  Many took this to believe that the Federal Reserve Bank is preparing a move to avoid a repeat of the 2008 economic crisis.  These measures include the cut interest rates should global trade be restricted due to additional quarantines and market shutdowns.  Such shutdowns have already occurred in China as manufacturers are losing domestic and international business due to an inability to work with the virus being a threat to their workers.

             Businesses all around the world have been impacted indirectly through the spread of the virus.  CBS has had to cancel filming of ‘The Amazing Race’ due to the travel aspect of the show which would have taken contestants to regions effected by the virus.  Apple has seen a decline in revenue and supply chain disruptions in China.  Even Corona beer has been heavily impacted despite not operating in regions that have the virus.  Due to the similarity of the name, people have shied away from the product, a significant indirect cause.  Only time will tell how many more companies are impacted, and how long it may take before global markets are entirely shut down to mitigate what may become a global pandemic.

References:

https://www.nytimes.com/2020/02/28/business/stock-market-today-coronavirus.html

https://www.msn.com/en-us/finance/markets/hong-kong-parents-want-refunds-as-schools-shut-for-months/ar-BB10nnSn

E-mail me when people leave their comments –

You need to be a member of UNH Economics Collective to add comments!

Join UNH Economics Collective