Boston Braces For More Market Volatility On Coronavirus ReactionsPlay
In a week of dark news, it was another stunner.
The Dow Jones Industrial Average dove 2,300 points by close Thursday, or nearly 10%. Investors reacted to President Trump’s directive that Europeans would be banned from traveling to the U.S. for a month to stop the spread of the coronavirus.
In Boston, the news hit especially hard. It’s a city of education and travel, and a center of finance, medicine and sports.
"No one really knows yet how bad it's going to get economically, how long it's going to last and what the rebound on the other side will look like,” said Jurrien Timmer, director of Global Macro at Fidelity Investments in Boston. “The market is just struggling to get a handle on where the light at the end of the tunnel is going to be.”
The Federal Reserve jumped in amid the rout Thursday with a plan to buy $1.5 trillion in government bonds to bolster financial markets.
The last time the markets experienced these kinds of wild gyrations was during the financial crisis of 2008. But Timmer and others say they see coronavirus as a shock, rather than a systemic implosion like the 2008 crisis was.
That would be good news if it turns out that way. Not only is the entire economy hanging in the balance, but Boston is a hub of the mutual fund and investment business. The industry employs thousands of workers who oversee billions of dollars in investments for retirement savers and large institutions. Dramatic market swings in the past have jolted the industry.
“Our industry took an enormous hit in 2008 to 2009, just tremendous,” said Karen Firestone, chief executive of Aureus Asset Management in Boston.
“We went from some of the leaders in the industry having to contract, and the rise of index funds,” she said, as well as, “banking mega-complexes that essentially lost a lot of their strength.”
Something similar could happen now, she said, depending how long this lasts. Firestone, like others, sees a recession — at least a half-year of a downturn — as likely, given the forced slowdowns in everything from travel and business conferences to local restaurant business.
If the coronavirus doesn’t clear up, she said, “All bets are off.”
Fidelity’s Timmer, too, said investors are looking for when the coronavirus will peak here in the U.S. In Boston, every major university in Boston has moved to online classes, the NBA is cancelling games and workers across the city are trying to accommodate demands to stay away from the office.
“It's a painful process because the more people stay home, the more severe the consequences will be, at least short term to the economy," Timmer said.
And, as indicated by the continued drops in the stock market, investors have not been consoled by what they’ve heard from the president so far.
On Thursday, the president of the Federal Reserve Bank in Boston, Eric Rosengren published a piece on the Fed’s web site, along with Massachusetts General Hospital’s Center for Disaster Medicine, Dr. Paul Biddinger. They urged companies and workers to enact what may feel like draconian efforts now, because those measures could head off worse times.
“These steps may be difficult, and take some adjustment,” they wrote. “But they might, over the coming days and weeks, mitigate the spread of the virus, and its economic impact.”
This segment aired on March 13, 2020.