麻豆传媒

The coronavirus (COVID-19) pandemic is creating a different set of challenges for financial markets, and making future events incalculable, according to , a professor of Finance at the University of Northern Colorado.

鈥淚t seems certain that the world is headed for a recession as a result of the coronavirus,鈥� he said. 鈥淭he difficulty that financial market participants are facing is determining how severe and long lasting the recession will be.鈥�

The possible recession鈥檚 severity and length depends on the progression and control of further infection rates around the world. The lack of experience in dealing with pandemics is exacerbating the ability to predict the market鈥檚 direction.

French says the 1918 influenza pandemic can provide some guidance. It impacted those in the working-age population at greater rates than what is being seen with COVID-19. shows that the service sector declined approximately 50% during the influenza outbreak but rebounded quickly after containment. The pandemic was relatively short lived; thus, the economy bounced back quickly.

鈥淚 expect to see a similar pattern with the current epidemic within these sectors,鈥� French said. 鈥淭he longer it takes to contain the spread of the coronavirus, the longer it鈥檒l take for the economy to rebound.鈥�

French is most surprised about the assets being sold off in financial markets that not only include stocks, but also include traditionally safe-haven assets, such as U.S. Treasury Securities and gold.

鈥淭here鈥檚 been an unprecedented dash-to-cash with investors selling everything for U.S. dollars (USD) that has led to a significant rise in the value of the USD compared to other currencies,鈥� he said. 鈥淭his may have longer-term detrimental impacts on the global economy since much of the global debt is denominated in USD.鈥� 

As the USD increases in value, it makes it more difficult for countries to repay USD denominated debt, and that could result in a debt crisis for some nations.   

French stressed that people shouldn鈥檛 panic and instead should focus on slowing the spread of COVID-19 by following the Centers for Disease Control guidelines. The market will eventually recover, and it鈥檚 not recommended to mass-sell during such events.

鈥淚t seems reasonable to assume that the future growth of our economy is tied to slowing the spread of COVID-19. If previous market crashes are any indication, people should not panic sell and should wait for markets to work through this period of uncertainty,鈥� he said.

French teaches Multinational Financial Management and Financial Markets and Institutions at 麻豆传媒 and spent his spring break recording lectures and preparing online assignments for the 60 total students in his courses.

鈥擶ritten by Katie Corder