Mar 13, 2020 3 min read

The coronavirus hit China about three months ago. While it was a new strain, it was related to others we have dealt with. It has been estimated that about 80% of the cases are relatively mild. Some people have compared it with the flu.

While most of us are not medical experts, the World Health Organization started to look into then tackled the problem. How soon a cure or vaccine will take to develop is unknown at this time.

While cases seem to be leveling off in China, we are seeing new cases in many other countries. China was able to contain it somewhat by taking extraordinary restrictive actions. It would be hard for our government to lock down and quarantine such large parts of the country.

The problems in China have affected many manufacturing plants that supply consumer goods to the United States and the rest of the world. This could cause some product shortages and lost profits. Company earnings are one of the biggest drivers of stock prices.

The virus has had a major impact on many companies around the world. There is a tremendous loss of profits. Seventy percent of our economy is driven by consumer sales.

People who cancel a cruise or a flight can never make that up. Anything that is time related cannot be recaptured. If it is a lost consumer sale, it might be made up with additional purchases in the future.

As people lose wages from missed work or layoffs, the loss of income may not be made up, reducing possible future sales. The same applies to future retail sales, if people are afraid to shop because they fear getting the virus. Airlines and cruise companies could push back or cancel future orders for new planes or ships, which could affect many jobs. There are many unknowns about when this situation will improve.

The stock market has reacted violently. We are seeing volatility: down 2,000 points one day and up 1,000 the next. While many elements of the economy, such as unemployment, are strong, many other parts are more fragile. We had a fully priced stock market that was on an 11-year bull run and was due for some correction. Many people wanted to deny the possibility of that happening or thought they could outthink it.

We discuss several times each year the stock market. While there is never a good time for a crash, there is a worst time. That is right before or early in retirement. That is when sequential risk can make retirement uncomfortable. You have to plan and consider your time horizon and other variables. Major corrections happen and their duration can vary widely. If you bought $100,000 of the Standard & Poor’s 500, on Jan. 1, 2000, it took 12 years to recover your investment.

No one has any idea when the market might recover. Some economists are more optimistic and think by the end of the year. Others think we could have a real recession by next year.

Your retirement is too important to guess. Next week, we will discuss ways to protect your family.

Gary Boatman is a Monessen-based certified financial planner and the author of “Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility.”

To submit columns on financial planning or investing, email Rick Shrum at rshrum@observer-reporter.com.