It will be known in future years as the coronavirus recession of 2020 or the COVID-19 Global Economic Slowdown, or maybe it will be called something else. After the events of these past weeks, there can be no doubt in anyone’s mind that there is going to be a recession in the United States and perhaps globally. It is better to accept this fact now and be prepared for the inevitable than to be caught by surprise.
Before I continue, I want to draw the distinction that the stock market is not the economy. As much as Americans like to watch the market numbers as if we are all hedge fund investors, the vast majority are not. Despite what the market continues to do, whether that be extending the historic selloff or tries to bounce back, the economy has already suffered insurmountable damage for 2020.
Consider for a second where we are in terms of the virus’s progress in the United States. There are only a couple of thousand confirmed cases and a few dozen deaths. A quick look around the globe will immediately tell us that even if we blunt the growth and spread of the virus better than most, we are at the beginning of its spread here in the States.
The worst-case scenario being floated right now is 1.7 million dead and millions more hospitalized. Hopefully, that is not the case, but if it is, that outcome is many weeks if not months away. And yet the economy is already being crippled.
Every major sports conference in America has barred fans or stopped altogether, travel from Europe has been largely suspended for at least thirty days, major theme parks and attractions are shutting down, theaters are emptying, and officials are telling us to stay home whenever possible. The trickle-down effect from even a week-long shut down of these things, much less multiple weeks or even month-long hiatus is going to deal grave injury to an economy that already was showing signs of slowing down.
That is tens of thousands of arena employees that are going to be staying home now. Thousands of theme park employees are going to be at home. Hotel workers are going to be at home. Broadway producers and cast are at home. Teachers are at home, along with their students. That means bus drivers are at home.
In terms of stopping the spread of a highly contagious virus, hopefully, this does some good, but in terms of the economy, it is catastrophic. Right now, in the early days of this experiment in mass shut down of public events and spaces, it seems fine and the right thing to do. But what happens in a couple of weeks once a pay cycle filters through?
Even the biggest and most robust companies in the country cannot afford to pay employees indefinitely when their revenue stream dries up. Small businesses especially cannot afford to pay people who are staying home. Officials are saying these closures can last up to thirty days in some spots. It does not sound like much on paper, but when it starts to stretch on, it is going to hurt.
Consider that last year; a study was done that claimed that 40% of Americans could not weather a surprise expense of $400 or more. What happens when those Americans are forced to skip a paycheck? These companies all say that they will continue to pay their employees or “help them” when times get tough, but no one should count on that. Michael Bloomberg allegedly promised his top campaign staff guaranteed employment until November but reneged once his campaign ended. Even the wealthiest Americans can’t stomach paying something for nothing in return.
The economic slowdown is going to spread into other areas that we are not going to realize until later down the road. The travel industry is going to be hammered first, but what follows? The housing market. The new car market. The food industry. Hollywood. It’s going to spread out to every facet of the economy through the rest of the year.
Simply rescheduling entire sports seasons, concert tours, and flights are going to be a nightmare that is going to cause issues for the rest of the year.
If it’s going to be that bad, what can you do to stay above the fray?
Accept the Coming Recession
Step one is going to be to accept that a recession is almost guaranteed to happen now. Listening to the politicians during an election year or listening to CEOs desperately trying to appease their investors is not going to get you anywhere. Everyone is going to tell you that it is not going to happen until the numbers come out this summer in Q2, Q3, and Q4. Accept it now so you can start to prepare.
You might need to reconsider future trips, large purchases, and general expenses. If you start realigning your finances and plans now, you might not have to tighten your belt as much when the recession finally hits.
Suspend Your Disbelief
The best thing you can do for your mental health and anxiety is going to be to suspend your disbelief for the remainder of the year. 2020 is going to be wild, and the sooner you can accept that, the better. As coronavirus ravages the world right now, in quarter one, there is still so much coming up that is only going to exasperate the growing problem. That includes but is not limited to: a dubious Summer Olympics and a presidential election.
If you are going to be shocked when the Olympics are postponed or canceled or by what the stock market is doing on a daily basis, then you are going to be living in a constant state of whiplash and anxiety. Going forward, expect the unexpected. If you are planning on things getting wild, you will be more prepared to face the uncertainty as it comes.
Control What You Can Control
During times of global crisis, there are very few things you, as an individual, can control. Identify those and start making plans for those facets of your life. Do you want to sell your stock or hold them? Am I washing my hands enough? Is it okay to cancel my cruise? These are all things you can control. There are going to be people trying to give you advice throughout this entire crisis, but there are certain concrete things you know you have power over in your life. Identify those and make a plan.
Let Everything Else Go
You can’t stop the stock market from collapsing. You can’t force Disney to reopen its theme parks. You can’t force your mom to stay indoors. There are a lot of forces that are going to be much larger than individual people. Try your best to let those go. It won’t be easy, and everyone else is going to be trying to control those very things that they cannot, but doing your best to stay above that fray is going to help immensely.
Mass panic, overreaction, and anxiety fuel a lot of behavior that exacerbates economic downturns. This usually stems from people desperately trying to change things they have no power over. As much as you don’t want to accept it, deep down, there is very little you can affect. It will be better for our collective psyche if we can take those things and move on. Doing that will better allow you to focus on planning for the things you can control.
Make a Plan, Stick To It, Stick It Out
By failing to prepare, you are preparing to fail. — Ben Franklin
This virus, the economic damage it causes, and the mass hysteria are all going to pass in time. This is the beginning of the pandemic now, but nothing lasts forever. Recessions do not last forever, pandemics do not last forever, and bear markets do not last forever. Everything is going to recover.
In the meantime, make a plan for your life, your family, and your finances and then prepare to stick to it. Things are changing rapidly, and everyone on the television has a vested interest in making you believe that things are better than they are. Trust your plan, stick to your plan, and prepare to ride this thing out.
There are not going to be any quick or easy fixes in the aftermath of this virus. The economy is going to try and play catch up, but it is not going to be able to make it. The presidential election is going to be chaos. The virus might be better or worse than expected. Make a plan, stick to it, stick through it, and you will come out okay at the end of these things.
If you accept the coming insanity, tamp down on the anxiety by controlling the things you can control, and make a plan for it then you will be in a much stronger position than most people who are following the wild swings in opinion and news because that is going to continue indefinitely. If you thought 2019 was a strange and wild year, you haven’t seen anything yet. Buckle up and prepare for the ride.