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

COVID-19: North Islanders bang pots and pans to honour essential workers

‘Hopefully we can keep it going for them because these people are showing up at work every day for us’

Bradshaw’s Photo Highlight: Juvenile eagle

‘I was able to drive up close to it and get a few pictures without getting out of the truck’

Port Hardy Secondary School’s 2019-2020 wrestling season

Both Lamothe and Speck thanked Cleary for volunteering his time to sponsor the program.

First government licensed cannabis shop on Vancouver Island celebrates one year in business

‘I’m really happy we’re here giving the public what they want’

Fire Chefs give back to community with one free meal a day to those who are in need

Fire Chefs will offer one free meal from 3:30 until 4:30 on the days they are open to those in need.

‘We will get through this’: B.C. sees new COVID-19 death, but 57% have recovered

A total of 1,066 people have tested positive for the novel coronavirus

Couple celebrates 61st anniversary through Vancouver Island seniors’ home window

Frank and Rena Phillips marked occasion at Nanaimo Seniors Village this week while social distancing

A look at some of the B.C. inventors creating life-saving tools in fight against COVID-19

Groups across B.C. are working together to create what they hope will help people affected by the pandemic

Association launches French-language games, online tools for families learning at home

Games, culture and vocabulary included in new virtual resources

‘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

Belle from ‘Beauty and the Beast’ entertains home-bound kids in Cowichan Bay

Alora Killam, 16, played the part in musical two years ago

55+ BC Games cancelled amid COVID-19 concerns

Greater Victoria set to host 2021 event

BC Hydro offers three-month bill ‘holiday’ for those affected by COVID-19

Industrial customers can defer half of their power bills

Some April Fool’s Day jokes bring much-needed laughter; others tone deaf to COVID-19

Police are warning the public not to use the ongoing pandemic as a punchline

Most Read