A sign board in Toronto displays the TSX close on Monday March 16, 2020. THE CANADIAN PRESS/Frank Gunn

COVID-19: It could take 3 years for stock market to recover, says B.C. economist

But true financial impact will depend on how long pandemic lasts

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’s Sauder School of Business, said it’s a guessing game as to how long this crisis will last.

“Obviously there’s a lot of volatility right now,” Brander told Black Press Media by phone.

“Any piece of good news will send the markets up and any piece of bad news will send the markets down.”

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 “circuit breaker.”

Part of the reason behind the breaker is that these days, a lot of selling and trading is done by programs that don’t 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.

READ MORE: 45 new COVID-19 cases in B.C., bringing total to 231

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.

“In the long run, I think the markets will come back. But don’t ask me how long I think the long run is,” he said.

If he had to guess? “One to three years.”

READ MORE: ‘Lots of unknowns’: B.C. restaurant workers stressed as COVID-19 causes layoffs

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.

“And a lot of people of course have pension plans and in addition they have some of their own savings,” he said. “Those people have been really hit.”

Brander’s advice to those people? “Hang in there while you can.”

The benefits rolled out by Ottawa Wednesday should make that easier.

READ MORE: Trudeau promises $82B in economic supports in COVID-19 fight

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’t 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 – especially if you’ve got bills to pay, and not too much financial cushion.

“I don’t 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.”

READ MORE: B.C. to suspend K-12 schools indefinitely due to COVID-19

READ MORE: Trudeau unveils emergency fund to help Canadians stuck abroad due to COVID-19


@katslepian

katya.slepian@bpdigital.ca

Like us on Facebook and follow us on Twitter.

Coronaviruseconomy

Just Posted

West Kootenay couple escapes Spain – safe, sound, and in self-isolation

BC couple Garrett Kucher and Tory Apostoliuk make it home after almost a week of lockdown in Spain

Hospital’s Chief of Staff asks residents for help containing COVID-19

Invermere & District Hospital Chief of Staff says COVID-19 cases here, caution and care needed

Social media a blessing and a curse during time of crisis: B.C. communication expert

‘In moments of crisis, fear is very real and palpable,’ says SFU’s Peter Chow-White

Interior Health officials outline pandemic response in virtual town hall

Kelowna-Lake Country MLA Norm Letnick moderates digital discussion, Q&A with Interior Health leadership

MP Morrison touts non-partisan effort to provide relief amid COVID-19 pandemic

The federal government has announced a slew of economic initiatives for those impacted by the pandemic

‘The Office’ star John Krasinski offers Some Good News in trying times

‘The human spirit still found a way to break through and blow us all away’

Liberals delay release of 75% wage subsidy details, costs: Morneau

Program will provide up to $847 per week for each worker

No laws in B.C. to force businesses to offer refunds, even during a pandemic

Black Press Media talks to Consumer Protection BC on how to navigate during COVID-19

COVID-19 essential workers can apply for B.C. pre-school child care

Parent referral opens, providers offered emergency funding

Most abiding by COVID-19 rules, back fines, arrests of those who aren’t: poll

But 64 per cent said they’ve personally witnessed people not respecting the measures

Walkers, grocery store customers courteous with physical distancing in B.C.

Some cyclists also acknowledge each other and walkers as well on a wide trail

B.C. worker advocate group calls for more sick days, protected medical leave

COVID-19 highlights need for changes to workers legislation: Retail Action Network

Most Read