No need to fear 1,000-point stock market drop because of coronavirus, economists say

Posted at 9:38 PM, Feb 24, 2020
and last updated 2020-02-24 22:56:45-05

NORFOLK, Va. -- If you haven’t looked at your retirement account balance as of Monday, you might be in for an unpleasant awakening. Concerns about the coronavirus sent the stock market down more than 1,000 points at the closing bell.

While 1,000 points may sound like a lot, Old Dominion Economics professor Robert McNab told News 3, "If a 1,000-point drop makes you nervous, then you shouldn’t be in the market right now.”

McNab said this translates to a three-and-a-half percent drop as the Dow Jones dropped to just under 28,000 points. McNab said there have been larger drops in the past.

“When news arises of a virus, or terrorist attack, or natural disaster, people can trade on the uncertainty, they can trade on the fear," McNab explained. "If you’re trading on the longer term, it’s hard to ignore that fear, but you need to.”

The coronavirus, the deadly virus that has killed thousands of people in China, has also infected the global stock market. How so? McNab said companies that have a big presence in China, such as Apple, reported they cannot meet its expected financial targets.

“Apple assembles their iPhones and other products in China, and those factories have been disrupted," McNab explained. "So, Apple has already reported they’re going to miss their target for the first quarter.”

He added any losses now should level off in the coming weeks and months. If you are an investor, what should you do?

“Don’t panic. The first thing to do is evaluate the news and evaluate how you’re position in the market," McNab said. "Are you comfortable with the risk of increased volatility? If you’re not, perhaps it’s time to reconsider where you stand.”

If you are comfortable, McNab said, "If you have a longer time horizon, you’re younger and you’re looking 20, 30 years to retirement, perhaps this volatility is something you can ignore because you’re going to be in the market much, much longer.”

McNab said if the coronavirus becomes a global pandemic that spans across continents, then that would have a much more heavier impact on the global markets.

You would see slower growth and a larger drop, but he said he does not see that happening.