Auburn professor says stock market drop is temporary, investors should not panic

Coronavirus

James R. Barth a finance scholar from Auburn University says that the stock market drop is temporary, and that the emergency relief fund will provide the boost needed to get the economy going.  

Due to COVID-19 and the shutdown of large parts of the economy, stock prices have sharply declined over recent weeks. However, on March 24, the stock market has rebounded and continued going up on March 25.  

According to Barth, stock prices are based on future expectations about the future, and not the past. Therefore, this reflects the $2 trillion going out to the American people. As well as the $4 trillion going to support the economy. It also reflects President Trump’s hope that parts of the economy can go back to work on April 12.  

Since as the pandemic is temporary, the shutdown in the economy is also temporary. In the past 15 years when stock prices declined by more than 30%, they got back to where they were within two to five years.

Once people begin recovering from COVID-19 and case numbers begin to lower, the economy will also begin to recover. Barth said that it is important to remember that loses for those who have not sold stocks are not actual losses, just paper losses, and for the patient investors, there may not be any actual losses.

With prices lowering, some are offering if now is the time for investors to buy rather than sell. Some investors are already buying, but not all stocks have declined in price. According to Barth, this means that it is important to be prudent when doing so.

Overall, Barth said it important to remember to stay calm and know that the economy will once again resume its upward trajectory. 

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