Coronavirus Recession

Recession Mar 28, 2020

I am scared. I am stuck at home. I am hopeful.

We are living in a unique and unpredictable time in history. It is important that we talk about the pandemic and how it impacts us and our financials. We should focus on the steps that we can take together to improve our situation and come out stronger.

Essential Resources

Photo by Erik Mclean on Unsplash

Hoarding toilet paper or any vital resources is not the way to go. Please only take what you need. We are seeing shortages of important goods such as disinfecting wipes, medical face masks, and sanitizers.

Because of hoarding, we have introduced price gouging to the local market, which is illegal and benefits no one. Price gouging occurs when the seller artificially raises the cost of goods, resulting in unfair and unreasonable prices.

A single face mask, normally $0.85,  should not cost $7.00.


The stock market has dropped significantly due to the impact of COVID-19.  For the time being, more than 30% of my wealth has been decimated. Just to be clear, I am not worried about my investments as a long term investor.

I am worried about the impact of a recession, which usually leads to a spike in unemployment. Most of the country, including New York, has begun implementing policies to shut down non-essential business and enforce work from home.

There are many businesses that cannot work from home physically. By definition, a shutdown will lead to a higher unemployment rate. I hope that you personally have not lost your job/source of income due to the necessary shut down.

If you have not lost your job, then please start saving for an emergency fund. Remember that this situation is unpredictable, we have no idea when we can get back to a normal life. Unless you are in the medical field, you have to assume to a certain a degree that you can lose your job.

Economists believes that we will likely see at least a 20% unemployment rate, possibly reaching 30%. For comparison, the 2008 housing crisis recession's peak unemployment rate was 10%.

A quick reminder that an emergency fund is 3 - 6 months of living expenses. Sit down for an hour and do the math to determine if you have enough in your bank account. Do not let the COVID-19 ruin your financial life while you still have a fighting chance.

If our fight against COVID-19 does lead to a recession (seems likely), just be aware that all recessions are cyclical. It will get better, it just takes time. All we have to do is survive those difficult times with an emergency fund.

Investing? 401(k)? IRA?

Just to reiterate, my long term investments will be fine because I am invested in the entire U.S. Stock Market. The U.S. Stock Market historically has gone up over long periods of time. Below is a chart illustrating the U.S. Stock Market from 1928 to 2020.

Source: Yahoo Finance

At the far right of the chart, you'll see the impact of COVID-19 on the stock market and our retirement savings. In the grand scheme of things, it is a "blip" in the market.

If you are a few decades from retirement, then you should have zero concerns. Based on historical data, the stock market will go back up along with your retirement savings.

No one knows when the stock market will go back up, all we know is that it will.

As many investors would say, "stay the course" and "this time is not different", which means to keep doing what you have been. If you still have your job, keep investing the minimum for a match in your 401(k).

For those of us with a little more expendable income, consider investing more into the market for retirement. Many long term investors are considering the downturn as a discount to buy in.

The one thing you absolutely should NOT do is panic sell your retirement funds because you would be selling at a low in the market and losing money in the long term. Panic selling is the equivalent of stealing from your future self.

Federal Government's Reaction and Impact

State and city governments are taking measures to slow the spreading of COVID-19 especially among the vulnerable populations. We will continue to see shutdowns in various businesses and policies to assist the increasing number of people who are unemployed.

Unfortunately, the best way to fight a global pandemic is to halt economic growth of specific industries that involve physical contact. We do not know how long it will last or what the overall impact will be.

The federal government has passed a $2+ trillion bill to both boost the economy and protect the millions affected by the shutdowns. The bill includes additional assistance for unemployment, government paid sick days, and check to individuals. You can read more here.

My Next Steps

1) Stay home and leave home only for essential tasks
2) Keep investing in total market index funds
3) Provide virtual financial literacy workshops (just had my first one with Baruch!)

Bonus reading for anyone with a 401(k): Check out Bankrate's fantastic article on protecting your 401(k) from the coronavirus recession.

I don't know what the future holds and I hope that everyone stays healthy and safe. We are, undoubtedly, living in a time that will go down in history. We are resilient and will get through this together.

Cover Image Credit: unsplash-logoMarc-Olivier Jodoin

DISCLAIMER: This blog references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice. This blog makes no representations as to accuracy, completeness, currentness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis. Please do your own comprehensive research before investing in anything.


Alan Chen

Hi! One day, I will build a technology company that will change the world. Right now my focus is teaching personal finance. Now that you know a little about me, feel free to reach out and chat!

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