Color of Money Chat Transcript: How worried should we be about the stock market?

Mar 12, 2020

Welcome to a weekly discussion about your money hosted by Michelle Singletary, nationally syndicated personal finance columnist for The Washington Post.

This week, Michelle held a special chat focused on how the coronavirus outbreak has roiled the stock markets. She was joined by Heather Long, The Post's economics correspondent.

Read some of the Post's coverage:

What a day. I'm scared. You're probably scared. So this is a good place to ask a question, vent or just play out your fears.

Just FYI, I have not sold anything. I haven't made any financial moves other than stocking up on some toilet paper but that's only because two kids are home from college. 

So much is uncertain but Heather and I will try to answer as much as we can. 

Let's get started. 

How much longer are the stock markets going to decline? How great is the decline going to be?

No one knows. And that's part of the fear that is feeding the markets to go even lower, sinking into an official "bear market." 

The key is -- how long will this health crisis last? How many people will be impacted? And how quickly can the economy bounce back? Right now, no one has enough data to answer those questions so the market is pricing in the worst-case scenario.

What pretty much every economist and Wall Street type I've spoken to has said today is this: The US should basically do a 2-week shutdown, similar to Italy. It will be painful. And it will require government help for people not working and businesses really hurt. But the hope is that would stop the flow of COVD-19 and boost confidence in the US government response to this crisis.

When will it be safe to re-invest in “normal” portfolios ?

The best way to answer this is to remember the best way to invest when there is so much uncertainty in the market.

Now’s a good time to invest and increase your contributions using an investment strategy called “dollar cost averaging," Jennifer Kruger, branch manager of the Bryant Park Investor Center at Fidelity Investments told me. Under this method, you regularly invest no matter what the market is doing. The effect is that you buy more of an investment when prices are low and less when costs are high.

Read: The market is teetering, but keep funding your kid’s 529 plan


Do you think the stock market would respond positively or negatively if the President resigned?

Honestly, what we need right now is stability. We need people to stop panic buying, panic selling and just making any moves out of any fear. Please keep in mind for the most part our economy was doing well - low unemployment, banks got money, rates low enough that people were buying homes, cars, etc. Now, I have been concerned about the increase in debt but still it's been manageable for folks. 

How worried should we be?

The US is in a bear market. And it's almost certain Q2 will be negative growth. The question is whether the US will go into a recession (two quarters of negative growth).

The reason there is such high concern on Wall Street today is investors don't think the government response is sufficient -- from Congress or the White House. 

Here's the list of worries:

1) Coronavirus spread

2) Oil price war

3) Inadequate government response.

If we could cross 3 off the worry list, it would massively help. If we could cross 1 off the worry list, we would have relatively few worries. So the key in the coming days is whether Congress can set aside partisanship and pass a fiscal stimulus bill and whether the WH/Congress can backstop the health system sufficiently to start halting the spread of the virus. That's a big IF. But let's hope it can be done.

Will the market being as volatile as it is have any impact on taking out a mortgage? I've been looking to buy a home for the first time, and am wondering if now would be a good time to try to get a home loan.

Lots of folks are asking this now. Actually with rates so low it's a good time to buy if you are ready to buy. But keep in mind if you are in an industry likely to be highly impacted by the spread of the coronavirus --travel, hospitality, restaurants, etc. you may want to wait to see how things shake out. 

I am (or at least recently was) one of those TSP millionaires, and have resisted the temptation to go online and see what has happened. I am about to retire and have half my money in the income (2020) lifestyle fund and half in 2030 as I expect to live 20 more years at least based on family history. That said, our brokerage account (which is mostly in retirement funds of various types) took a $16K hit in February alone (monthly statement.) We only take the RMD as my spouse is of that age, while I am not yet. I think we are OK, assuming no huge business bankruptcies, but what do you think?

I used to work for an investment firm in London. One of the scenarios we used to run is how long it takes markets to bounce back after a big downturn like a bear market that we are experiencing now.

The reality is the market has always bounced back, often after just a few months. But even the absolute WORST CASE if you had invested your money the night before the 1929 stock market crash, you would have earned all your money back with 13 years and made money after that. Yes, that's a long time, but if you are in a 2030 plan, you are thinking longer term, which is the right mindset. 

No one knows how long this coronavirus crisis will last. But there's a legitimate reason to think that the economy and markets can bounce back after this situation gets under control. 


Why? Will they recover? When?

Trust me, I feel your pain. I haven't looked at my 401 (k) in more than a week. Why? Because I can't trust that I won't have a heart attack. 

If you sell, you lock in losses. The losses you see on paper right now -- and please stop looking if you have years to retirement -- are only on paper. Sell and they are real.

Now, if you are close to retirement and retired and you were 100% in equities the hurt is real. But you shouldn't have been that heavy in equities. If you can, try to fund your retirement needs with income and not sell into the fear right now. 

If you feel you can't wait, please talk to a professional - fee-only planner -- to figure out the best way to reduce your losses. 

When you say 'shutdown' would that also mean freezing the market? How likely is that scenario?

On CNBC today, one of the anchors did suggest declaring a "national holiday" for 2 weeks and stoping trading. Some of the other anchors balked at this idea. 

Personally, I don't think you need to stop trading. What you do need is to ADDRESS THE HEALTH CRISIS. And it seems one of the best ways to do that is to essentially have just about every American stay home for 2 weeks. So the "shutdown" would be for the real economy. This is what China and Italy ultimately did and it seems be working on the health side. It's not fun. It will cause pain and we need to help people most severely impacted. But think about it: would you rather get this over with for 2 weeks or have this drag on for months? 

What businesses will be helped by the coronavirus pandemic?

Purell is doing great!

If you're asking because you want to buy stock in a certain company or business that may benefit from the virus that's not the way to invest. Because frankly we just don't know who will turn out to be the winners and losers. Even with Purrell what if some of their employees get sick and they have to shut down production? 

What sectors do you believe will be the first to recover once’s fears are abated?

Again, no one knows. If for example the government recommends we all stay home for two weeks and people stop eating out, will they go back to eating out like before? Will they rebook cancelled trips and thus the airline industry recovers nicely? 

We just don't know. 

However, just think about what you would/will do once things calm down. I'm still going to the grocery store. Haven't been to the movies in a weeks but that's because I'm cheap and I have Netflix. 

why does the president not simply expand unemployment benefits to account for two-four week unemployment for self-quarantine? it would be much simpler and faster to get into place than tax cuts (or a tax holiday) and less controversial....

What you are asking is what a lot of folks are asking. Whether it's an extension of unemployment benefits or a comprehensive medical response to the virus -- we need a plan we can all wrap our heads around. This is what isn't happening. Even after the Trump's speech the White House was walking back or was forced to clarify things he said. Chaos breeds chaos no matter your political leaning. 

Are there similarities between the two declines and, if so, will recovery be similar?

This is not 2008. And that's both good and bad.

The good part is that the banking system looks OK for now. In 2008, the big worry was that the entire banking system would die. So far, banks are still lending -- to Main Street and to each other. 

The bad part is today's crisis is, in many ways, happening much faster. To put it in perspective: This bear market occurred in just 24 days. In 2008, it took 274 days to get there. So policymakers have much less time to respond and figure out what to do than we did in 2008.

The hope is this recovery will be faster IF the health crisis can be contained soon. Imagine if cases of COVID-19 start to decline by mid to end of April. That would be a gamechanger for health, the economy and the markets. But we have to get there and right now it looks likely to get worse before it gets better. 

I'm a Boglehead, which means I'm basically staying the course. I'm still contributing to my IRAs and also my index mutual find. I'm a fan of dollar cost averaging, and right now I'm actually buying low. What do you think about this?

I'm doing the same. Every single financial professional I've talked to says if you have time on your hand, wait this out. 

What market segments will be most likely to weather the uncertainty we are seeing now? I would think people will keep using their mobile phones and online services where as cruise ships will take a while to come back.

Yup. You got it. This is the Clorox and Netflix economy right now. The other somewhat surprising winner in all of this is real estate. Mortgage and refinance applications are through the roof right now after the 30-year mortgage hit an all-time low of 3.29% in the past week. So housing and home-related stocks and parts of the economy are likely to do well. I was just talking to a roofer. His business is down this week, but he's got a lot of people calling and telling him they want him at their place as soon as this health crisis subsides. 

Note to Self - Turned 60 last October and swore I would move investments to less risky portfolio. But i procrastinated as usual. Note to Future Self - When the markets stabilize - Promise to re-balance the investments for our future.....

Your current self is very smart. For those who didn't rebalance or take into account the closeness to retirement it's procrastination not the virus that is at fault. 

But you know what? You're human. Many of us are new at this investing game. We stay put or take on more risk not because we are greedy but because we want to make sure we have enough money to live on in retirement or send our kids to college. 

I do hope people learn from this when we get clear. 

Was the Stock Market just looking for an excuse to have a correction? COVID-19 is dangerous and unpredictable but, was it the straw that broke the camel's back?

You make a good point. There's widespread agreement stocks were overvalued at the start of 2020. They were priced for the best case scenario of a global economic rebound in 2020. Obviously we are now talking about a near definite negative GDP in Q2 and possibly a worldwide recession. 

So yes, a correction was probably overdue. BUT I think we're in a bear market because this has a) come on so quickly and b) the government has fumbled its response so the COVID-19 situation is escalating worse than initially expected.

To put it another way: 2 weeks ago economists I talk to regularly still thought this would be a "V" or "U" shaped scenario. Today there is serious debate about if it's even possible to avoid a recession. That's a RAPID re-assessment of the risks.

Trump and Congress keep talking about insurance companies waiving the cost of co-pays for testing. It so obviously signals their lack of awareness because most Americans don't have co-pays. They have high deductible plans where the patient pays out of pocket until they hit the 6k threshold. How come no one is talking about that?

We are talking about it. 

Read: At White House, insurers again pledge no-cost virus tests


My financial guy called a few days ago to know how I wanted my dividends handled (what a nice question to have!) and suggested putting them back into stocks. I'm lucky to belong to a brotherhood investment company that is conservative in its strategies. I told him put them back in the market. If I pull out now, I will gain little. If I wait, chances are good that I will at least break even and may even gain a lot over the long haul. Selling low, buying high - always a bad strategy!


Have there been any studies done on how the now WHO declared pandemic may be affecting hiring? I read and hear a lot of talk about relief in the form of sick-day compensation, extended unemployment benefits, work form home, etc. but nothing about how this impacts hiring of new employees.

My colleagues and I did a story on this yesterday: "The first layoffs from the coronavirus are here"

You are 100% right to focus on the "real economy" and what's going on with hiring. Airlines have put on a hiring freeze and have delayed training for new employees. Other companies, like WaPo, are continuing to interview and onboard new employees virtually. 

New data out this morning shows unemployment insurance claims LAST WEEK actually fell by 4,000. 

Put all this together and what I'm seeing is this: Layoffs are starting. Hiring is at a standstill (except in health care). White collar jobs, as usual, are easier to do hiring/onbarding virtually. So this is another factor layering the pain on for retail workers, restaurant workers, manufacturing workers, etc.

Wondering if and how the 529 calculus changes if you invest via a large annual lump sum instead of monthly installments. Right now I am thinking of delaying the contribution for 3-6 months, so I have more cash on hand, but still get some benefit from relatively lower stocks, even though it means I miss the absolute lowest. Other than now, the annual system has been working really well for us.

If it were me, I would dollar cost average. Start funding with a set amount on a regular basis. 

It looks like all major world currencies are strengthening, or increasing in value. Does this mean they are strengthening against the US Dollar? What does a weak dollar imply for economic health?

Good q. I typically watch the US Dollar Index (good graph here

What I'm seeing is that the US Dollar Index is up today, indicating the dollar is strengthening. That's not surprising since a lot of people around the world are buying a ton of US government debt at the moment and the European Central Bank just announced more stimulus. Overall, the US Dollar index is trading smack in the middle of its 52-week average, so I don't think we're in any sort of panic situation yet.

What all this tells me is what you'd expect (and what you're seeing in bonds): The US is perceived as one of the stronger economies right now RELATIVE to other parts of the world. 

Why can’t “the market” and traders stay the course the way investment advisors are telling individual investors to do? Isn’t this just making a self-fulfilling prophesy of recession and worsening an already bad situation?

They have a different agenda often. 

Read this: The Pros Have to Sell Stocks Now. You Don’t.


Sorry for the question, but is there any thought on how long this will last? How long to come back from? Do experts think this is a "blip", or a years long slog back? Thanks!

It's all about the virus right now. So professionals are telling me that the underlying economy is still strong. If we can control the spread of the virus and the crisis doesn't last too long, we could return to a healthy stock market without these wild and worrisome dips. 

Has there ever been an episode of everything tanking - stocks, bonds, oil, gold, etc.??? What does that portend?

There have definitely been short-term periods in the past when everything is tanking. What it means is simple: There's panic selling. 

Generally speaking, the bond market is the one to watch the closest. That's going to tell you a) the best forecast for growth and b) whether these shocks are turning into a financial system problem as well. There were some worrying signs yesterday of odd trading in bonds. It seems more under control today, but that's definitely the top financial thing on my worry list right now.

When Trump said that he was going to impose a travel ban to/from European countries, I assumed that he knew this decision would cause turmoil in the markets but he made the tough decision as part of his efforts to keep U.S. population safe. However, it seems that he thought that this move would calm the markets. Can you help me understand why he thought that?

I really wish I could. But, no. 

Read: Trump’s Oval Office failure


Will it crash? Will there be a depression?

You could argue this is a crash already. So far today stocks are having their worst one-day decline since the October 1987 crash. The downfall in stocks since Feb. 12 has been incredibly rapid -- far more rapid to get to a bear market than what we saw in 2008.

Will there be a recession or depression? Honestly, that depends a lot on what the US government does in the next two weeks. If there is bold and swift action to stop this health crisis and provide money/loans to people and businesses hardest hit by shutting most foot traffic down for a two weeks, then we probably get out of this with only a quarter of negative GDP or a mild recession. But if we can't get this under control soon, then there's more risk of a longer recession.

The hope is this will be contained by the summer, if not sooner. In which case we would not be talking about a depression. And only a mild recession. But I don't want to downplay the fact that would hurt a lot of people and businesses. And it could trigger some big downgrades in BBB debt into junk bonds, which could cause some companies to go bankrupt.

As discussions continue about possible life buoys for hourly wage workers and others, I've yet to read any discussion about the impact on and possible support for the 16 million self-employed Americans, many of them freelance, part-time, consultants, etc. I would love an exploration of this topic.

We touched on this some in our story yesterday about "the first layoffs from coronavirus are here." 

You are right that independent contracts and gig workers are some of the hardest hit right now, especially the many people who work in food service and events for major companies. A payroll tax cut won't help them because if they aren't getting a paycheck, then they aren't paying payroll taxes anyway.

Most economists across the political spectrum are recommending Congress do what it did after 2008 and just send every American a check for, say, $500. This would get money into everyone's hands, including the workers you are talking about.

If this market fall continues, folks who need to take a RMD in 2020 will have that distribution deducted from a considerably smaller account in their IRA accounts at the end of 2020 than the accounts’ actuarial valuations dictate as of 12/31/19. Do you think Congress could provide some relief?

I have been thinking the same thing. And I feel for these folks. One would hope this would be part of an overall package of relief. But so far, I haven't seen this addressed. However, you have until the end of the year to take the RMD so waiting may be the prudent thing to do. Also, the Secure Act now delays RMDs until 72 if you had not reached 70 1/2 by the end of 2019.

How long will it take global supply chains to recover?

This is a great question. And another unknown that's causing investors to panic. My colleagues in China did a smart piece on this yesterday about how Chinese factories are struggling to reboot.

The bottom line: It's taking longer than anyone expected. And there's serious talk of shifting supply chains to prevent this happening again. That said, that will hurt China more than the US.

I'd think E-books, Netflix et al., online shopping. Any others?

Good guess. But I'm having trouble reading the e-books and audio books I have because of what's happening. I can't concentrate. Even TV hasn't been calming. Then again, I'm in the news business and I'm trying to get up with what's happening. 

Caroline from Troy, NY, (She/her). Hi Michelle. I’ve been following your column for about a year and, thanks to you, have built up an emergency fund. That enabled me to pay for COBRA insurance ($1,700 for two months!) when I changed jobs in January. My new job has a 57-day lag before health insurance kicks in (which is crazy, but here we are). Were it not the emergency savings, I would be uninsured right now and even more stressed out about the Coronavirus. I also have the peace of mind of still having money some put aside. So, thank you so much for what you do! I hope you and your family are well.

I needed this! Thank you for sharing. 

One of the impressions I'm getting is that this crisis is revealing the fragility of our economy. If the airlines can't sustain a few weeks or months of slow sales, if supply chains can be so badly disrupted, etc., then it suggests that what looks like strength is actually tentative. What are the chances that large-scale actors (governments, industries, markets, investors) are going to make moves to shore up this apparent fragility?

You are right and wrong, I think. You are right that we should have long prepared for a pandemic. We've been here before. 

But I think you are wrong that they could have enough forethought to prepare for complete shuttering of cruises, flights, schools shutting down. 

And you are right that we all -- individuals and businesses -- should have enough saved to withstand a few weeks or months without income. 

But when people can't earn a living wage and others living way above their income any cold or virus our economy gets makes things far worse. 

And don't get me started on the need for a better healthcare system and one that doesn't depend on people having insurance through their jobs. 

My 401 k is nose diving 11k in month I’m 58.. planning to access it at 591/2 what options do I have at this rate it will me gone by then.. I absolutely don’t trust trump to do the right thing for me what other options are being talked about

Honestly, could you wait to tap the money? Maybe you delay retiring if you are working. If you aren't working, please talk to a fee-only planner or call the company managing your 401(k) so they can help you figure out the best way to tap your funds right now. I had a long conversation with Fidelity experts and they are encouraging folks with plans with them to call to get direction. Every planner I know has been reaching out to customers or taking their calls to help them figure out what they should and shouldn't do. 

We just got back on our feet from the meltdown of 2008, we lost everything, home etc . and now this is happening. I literally paid off our last debt last week and started putting money away for a new place to live (we live with family) and emergencies, and now that money has been spent on stocking up on food. Both my husband and I will lose our jobs if there is a quarantine. Three members of my family, whom I live with, would die if they contract this illness. And I have a profoundly neurologically disabled child. I'm just over the roller coaster ride that is our financial life and emotional life. Any words of wisdom.

I'm so sorry about everything that has happened to you. I need to say that first. But you know what? You got through that and you will get through this. May I suggest you stay put with the family right now. Don't make a move to move. And you are in a far better place having paid off that debt in case you do lose your jobs or experiment a disruption income. 

Yes, people are dying but this does not mean absolutely those you live with will. Maybe. But maybe not. If you think you are in danger, get tested and seek medical help. 

No doubt this is a scary time. I'm scared. But I keep telling myself this too shall pass. And it will. 

The good thing is you know how to live on less. You know that you are capable of recovering because you've already done it. Your history is an indication that you can survive. 

To both of you for this chat. I’m trying to remain calm and rational through all of this, but it’s been tough. This session has helped. Take care!

Thank you. And look, I know we don't have all the answers. No one does. 

But my goal is to acknowledge your fear, recognize that you have a right to feel what you feel. However, the more of us who remain calm the better for everyone. 

It's like when they train us not to panic in the event of a fire but to exit in an orderly fashion. If we all run, scream we trample each other and people get hurt. When we remain calm, fewer people get hurt. The same applies here with our money and investments.  

I've already offered to pre-pay my petsitter for future services. She said she had three cancellations yesterday alone.

If you can afford this what a nice thing to do. 

Michelle, with all due respect, I believe this is a bad idea. This is not your normal bear market. I believe the best thing for people to do is wait until the situation shows signs of improving and then get back in the market. The infections in the US have only begun and it's possible businesses could grind to a halt in which could case today's market prices to look great.

What you suggest is "timing the market" and every expert advises against this. Sure, if you need your money to live --buy groceries, pay rent, don't invest the extra funds. But if you are financially stable no reason to try and guess when is the right time to get back in. 

A friend of mine pointed out that in times like this, we should think about how we can help those who are affected. i.e. I'm one of those white collar workers who can work from home and won't miss a paycheck. She suggested things like food banks or charities that help with utility bills. Do you have any suggestions of specific charities in our local area who are doing this kind of work? Maybe we should be looking to help local free health clinics?

I think this is a a great idea. Food banks are always in need. Check with local charities to see what they need. But look at your circle of friends and relatives. What do they need that you can help with? As for health clinics check to see because you want to be properly trained so that you don't get sick. 

For those of use lucky enough to be able to work from home and can piece together childcare, what is the best way for us to help our community? Food banks? Online school resources? I want to help, but don't know the best way to allocate my donation funds.

All the above. Perhaps your work schedule allows freedom to help watch kids for parents who can't work at home. Check with your church or religious organization to see what needs they are hearing are being unmet. 

I find cooking shows soothing. After all, a lot of us will be making more meals at home in the next few months, and don't want to eat the same-old same-old, especially if we can find frugal new recipes.

You know, you are so right. I love "Chopped" and watched an episode last night and it was calming. Good idea. 

Two years ago when my wife joined me in retirement we said lets put ten years of cash into our retirement allocation. In February we reallocated to keep ten years worth. Now we can just sit here and watch the portfolio go down, but know we are ok for at least ten years. Kudos to you from an author/advisor you had in the chat.

Thanks for sharing. The key here is you planned, which is so important to financial planning. 

Just a comment. There's been so much talk of the financial impact of this virus but - let's remember to hug our loved ones tight and be thankful. And Michelle especially, I hope your daughter is doing much better.

You are so right about loving on each other. But keep your distance so you don't spread the virus. So far my kids are doing well, including my daughter who had a collapsed lung last year. We are in constant contact with her. She's in Houston. 

I'm so sorry if we didn't get to your questions or concerns. I read everything and may address some of the questions in a column. 

One way to stay informed is to sign up for my weekly newsletter. Here's the link to sign up. And you can follow all of Heather's work here

In This Chat
Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Wednesday and Sunday and is carried in more than 120 newspapers.

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Heather Long
Heather Long is an economics correspondent. Before joining The Washington Post, she was a senior economics reporter at CNN and a columnist and deputy editor at the Patriot-News in Harrisburg, Pa. Long started her career at an investment firm in London. She earned her master's degrees from Oxford University, where she was a Rhodes Scholar.
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