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

Deltassist takes over operation of North Delta food bank

Gore Mutual Foundation has pledged to match up all cash donations to the food bank before April 30

Urban Safari Rescue Society starts online video presentations

Animal shelter struggling to stay afloat during pandemic

Virtual Vaisakhi initiative aims to celebrate by helping others

In absence of annual parade in Surrey, Sikhs raising funds to honour spirit of sacred holiday

SIMPSON: In taking care of its vulnerable, Surrey is showing what it’s made of

Stories about people helping others have overwhelmed the newsroom since COVID-19 hit community

COVID-19: Daily update on the pandemic in Surrey, White Rock and beyond

APRIL 8: More than 400 pet adoptions amid pandemic

UPDATE: Canadians awake to extra COVID-19 emergency benefit money, feds clarify changes

The CRA and federal officials are working to clarify the confusion around payments

Major crimes investigating sudden death of North Okanagan child

The 8 year old was flown to Kelowna General Hospital and died hours later

BC institution has highest number of positive results for COVID-19

11 inmates in Mission test positive for coronavirus, more than any other federal prison in Canada

Easter Bunny added to B.C.’s list of essential workers

Premier John Horgan authorizes bunny to spread “eggs-ellent cheer” throughout province

COVID-19 self-isolation plan or quarantine, returning B.C. residents told

Premier John Horgan says forms must be filled out by travellers

More than 400 animals have been adopted amid pandemic: B.C. SPCA

People are taking this time of social distancing to find a loyal companion through the animal welfare group

B.C. secures motel, hotel rooms for COVID-19 shelter space

Community centres, rooms reserved for pandemic self-isolation

Sanders drops 2020 bid, leaving Biden as likely nominee

Sanders plans to talk to his supporters later Wednesday

Most Read