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

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Don’t avoid doctor’s office if you need help, say Kootenay Boundary physicians

There are alternatives to coming in physically to offices, docs say

Grand Forks and Boundary cancellations, changes due to COVID-19

This newspaper’s list of community events, institutions that change or cancel due to pandemic

Boundary friends make the best of a birthday in isolation

11-year-old Becca Macfarlane had hoped to go bowling with her friends

Q&A: Interior Health CEO answers questions on COVID-19 response

Susan Brown, president and CEO of Interior Health, answers questions regarding COVID-19

6.5-magnitude earthquake in Idaho shakes the Kootenays

An earthquake was reportedly felt just before 5 p.m. throughout parts of B.C. and Alberta

‘We don’t need this right now’: B.C. man breaks up road rage incident

Two men were throwing punches on Tillicum Road in Saanich on Vancouver Island

B.C. adding $300 to monthly income and disability assistance payments

‘Crisis supplement’ for COVID-19 for April, May and June

‘A matter of human decency’: Truckers’ union calls on gas stations, rest stops to fully re-open

Teamsters Canada wants feds, provinces to put pressure on facilities to re-open for transport workers

Migrant worker advocates blame feds, employers for COVID-19 outbreak at B.C. garden store

Migrant farm worker group calls on government for adequate health and safety requirements

‘There can be no ambiguity’: Travellers brought home to B.C. must self-isolate

Health Minister Adrian Dix said the mandatory isolation must be abided by

COVID-19 has been impacting Canadian economy since January

But full effects of pandemic won’t be known for months

Doctors trained abroad want to join front lines of COVID-19 fight in Canada

B.C. is looking to allow internationally trained doctors to work under the supervision of attending physicians

Fake test kits and other COVID online scams play on public anxiety: fraud centre

Vancouver has seen a spike in commercial property crimes, with offices and stores empty because of COVID-19

Most Read