Thus far, the 2020 calendar year has been filled with no shortage of excitement, entertainment, heartbreak, anticipation and whatever other emotion you can think of. In two and a half short months we have experienced the following: people freaking out about an unknown disease; the tragic accidental death of basketball player Kobe Bryant, the Astros cheating, and much more. This week, however, we want to focus on Covid-19.
As I’m sure, you have all heard already novel Coronavirus (COVID-19) is running rampant. It is no longer only affecting people in Wuhan, China. There are now more than 65,000 cases outside of China. The death toll continues to climb as well, now past 5,400. The official death rate is around 3.5%. For more information and to track COVID-19 cases, deaths, and recoveries, John-Hopkins University released this detailed website.
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It is easy to see how COVID-19 has affected those in China. But what effect will it have on the rest of us? Below we look at the potential effects from a macro perspective, the effects on the average folks, and the effects on businesses.
Global Effects of COVID-19
As COVID-19 panic started to develop in the epicenter Wuhan, it demanded a response from the Chinese government. The Chinese government delivered. They responded with such magnitude it raised the eyebrows of a few of us around the world looking in.
Mandated quarantines of Wuhan and surrounding areas, the rush completion of a new hospital from scratch in just 10 days? Shuttering schools, factories, and closing down domestic and international air and train travel.
The response seemed appropriate for an unknown pathogen infecting thousands, but at the time this was a “China problem”, or so the world thought. As the virus trickled into Middle Eastern and European population centers, many of us in the west started to realize it was only a matter of time before this was going to affect us and our daily way of life in a real way.
We have already started to see major economic effects on a global scale. Large events are being canceled, sporting leagues are postponing games for the foreseeable future, factories are shutting down, travel is being restricted, and countries are implementing voluntary and forced quarantines.
There are a few pundits and media mouthpieces that are pushing the narrative that this may be the end of the global economy as we know it, with supply lines being cut off, and the world’s factory (China) shut down.
It is truly a bit too early to tell, but we are already seeing some effects of supply chain limits and increasing demand on our medical providers in Asia, the Middle East, and Europe. In response, North American markets are down nearly 30% from their peak in mid-February. Companies like Apple have already announced a delay in product launches.
COVID-19 Effects on Canada
Canada hasn’t seen a lot of cases of COVID-19 yet, comparatively. However, that could soon explode as testing becomes more available. If and when that happens, we too can expect some international and domestic travel restrictions, probably some temporary school and sporting event closures, and maybe even quarantines for certain neighborhoods, cities, or regions.
This does not mean that all places of business will shut down. This does not mean transportation of goods and foods will be slowed or stopped, and people won’t be able to go to work. But we do expect people to take more precautionary measures for the foreseeable future; working from home if possible, avoiding public venues, making less trips to the grocery store, and focusing on just getting by.
Obviously some industries will take it harder than others. The entertainment, hospitality, and transport industries will slow and some will be out of work for the medium term. Well, if this segment of the population can’t go to work, how will they pay their rent/mortgage and other fixed expenses? If they don’t get paid how will they afford to pay for their mortgage, debt payments, food, or expenditures?
That cash flow would probably have to come from savings. But wait! As we have outlined numerous times before Canadians Lack Personal Savings. The majority of Canadians are living pay-cheque to pay-cheque, less than $200 away from insolvency every month.
How COVID-19 Will Affect You
We already touched on this above. The COVID-19 effect could see a lot of people unable/not allowed to attend work, or at the very least, working from home. This means that some will be earning less or nothing at all. The overall purchasing power for a lot of people could see a substantial decrease.
Furthermore, access to, never mind paying for luxuries in life could become more difficult. Maybe you’ll have to postpone your home upgrade, cancel Netflix, or get rid of the extra car. The 2020 summer vacation might look different too if international travel is halted.
If you know that you are strapped for cash or living pay-cheque to pay-cheque, there is a good chance things will get a lot tougher. It might be time to sell some of stuff that you no longer use, and put that sum aside for when money gets tighter.
Although things are getting serious, and believe us they are, from a financial planning perspective, remember to stay on course. If you and your financial planner were prudent, your plan should still be applicable.
When the market is down, it is not the time to sell. The plans that were put in place are still there to help you achieve your goals. Although there is a potential pandemic, your long-term and retirement goals are probably still the same.
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Disclaimer: This Forbes Wealth Blog is for informational purposes only and does not constitute financial, legal, or tax advice of any kind. Please consult your legal, accounting, tax, investment, banking, and life insurance professionals to get precise advice relating to your particular situation before acting upon any strategy