FILE – A Toronto Stock Exchange ticker is seen at The Exchange Tower in Toronto on Thursday, August 18 2011. THE CANADIAN PRESS/Aaron Vincent Elkaim

FILE – A Toronto Stock Exchange ticker is seen at The Exchange Tower in Toronto on Thursday, August 18 2011. THE CANADIAN PRESS/Aaron Vincent Elkaim

Think before you buy or sell stocks amid COVID-19 market turmoil, B.C. professor urges

The stock market plunged and shot back up within 48 hours

Despite the drop in stock market prices Monday, one B.C. economist is saying this isn’t the time to go all-in.

Andrey Pavlov, a finance professor at Simon Fraser University, said although COVID-19 has had a marked effect on world markets, it won’t last long.

“Clearly, one way or another we’re going to get a handle on that virus,” Pavlov said.

“The world economy was doing quite well before the virus and I expect whatever factors were playing into that will kick in again after.”

Stocks went into a steep slide Monday on Wall Street as a combination of coronavirus fears and a crash in oil prices spread alarm through the market, triggering the first automatic halt in trading in over two decades to let investors catch their breath. The Toronto Stock Exchange posted its biggest one-day loss since 1987, although it surged 400 points in early trading Tuesday.

The novel coronavirus, or COVID-19, has infected more than 80 people across Canada and killed one care home resident in B.C. Worldwide, there have been more than 100,000 COVID-19 cases, the majority of them in China, where the outbreak began.

VIDEO: B.C. records first COVID-19 death in Canada as province hits 32 cases

The drops spurred worries among people invested in the stock market, but Pavlov said the advice remains the same this time around as it does for any market plunge: wait it out.

“You do not sell when the market is down, like right now, [because] markets stand to recover,” Pavlov said.

He said most people invested in the stock market have at least a few years before they will need that money, while people staring down retirement should not be so heavily invested to begin with because they don’t have time to wait out fluctuations.

And it’s not all bad news for the market.

“Bonds have done incredibly well, so a balanced portfolio that is designed to serve you for the longterm… you will experience losses, but they won’t be too bad,” Pavlov said.

“If you hold on to it, things will very likely improve.”

But if people sell in a panic, Pavlov noted, that’s what will do longterm harm to the market worldwide.

But while right now is not a bad time to buy, people relying on a payoff from buying more than they can afford right now could hurt both themselves, and the world’s general financial situation.

“That is the kind of thing that can transform a relatively short term problem into something that can last for years,” Pavlov said, if people take out loans or mortgages counting on low interest rates or an upcoming boom in the stock market.

READ MORE: Stocks slide on Wall Street over coronavirus and oil crash

READ MORE: North American stock markets surge higher in early trading after crash on Monday

– With files from The Canadian Press


@katslepian

katya.slepian@bpdigital.ca

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