From housewives fighting in the aisles over toilet paper to multimillionaires dumping equities for 'safe havens' like gold there is plenty to undermine confidence. Photo / file
From housewives fighting in the aisles over toilet paper to multimillionaires dumping equities for 'safe havens' like gold there is plenty to undermine confidence. Photo / file
BUSINESS ZEN
Comment
Markets, when viewed over time, are essentially a story of expansion and reduction, reduction being termed a recession.
Economists often call this by other names as the intangible economy swings back and forth like a pendulum.
I guess, given everything that is happening in response to a certain microscopic pathogen, this was not to be unexpected.
These are more challenging times than most and in some markets we are seeing unprecedented volatility, because (although viral epidemics are not new) the interconnectedness of our globe provides an ideal environment for a communicable virus to spread.
When you throw in the repeated line that humanity is "still learning about the virus" this is like pouring fuel on a fire of uncertainty and doubt. Anyone thought about Brexit lately?
And breathless media coverage only seeds more fear rather than inspire confidence.
Indeed, from housewives fighting in the aisles over toilet paper to multimillionaires dumping equities for "safe havens" like gold there is plenty to undermine confidence.
Amazing for a bug which, we are told, most people won't distinguish from a bad cold.
Central banks reducing interest rates is potentially a blunt instrument.
Covid-19 doesn't completely present a demand side problem, the material issue is supply.
Disruption to production and supply chains is what needs to be addressed, and in smart and innovative ways.
And this is also as much a community issue as it is about economics.
The most effective societal responses, and I don't presume to oversimplify a complex issue, are likely two-fold - change how we operate by doing things differently (including how and where we work, interact and treat illness) and invest in our health system (including protecting our front line health workers through to funding of protective gear through to research into a vaccine).
Rather than shaving points off interest rates now, these should be kept in the back pocket because once this virus is dealt with (and this will happen in time) demand will need to be stimulated as economies move into the "new normal".
Although it is easy to be drawn into Twitter commentary or clicking the story about the down side of the virus or burning time trying to find hand sanitizer when ordinary soap and water will do - the best use of our time will be spent in applying ourselves to finding solutions (ordinary and innovative) to the challenges which the next months will present.
I am working with a number of clients where we are breaking down each part of the business identifying risk and making arrangements to mitigate the impact (both on the demand and supply side) and I have respectfully dropped the handshake at the start of those meetings.
One of our major banks 'formally forecasted' two periods of negative growth. Photo / file
The bank I mentioned above noted that this period of time, where the virus will negatively impact us, will end eventually.
They are right, the question is how long will these conditions last and where is the point of peak disruption.
The key point is to set yourself, your family and your business to weather what is ahead – the next "stop" on that journey will be the now assumed inevitable declaration of a pandemic (which is just a word to describe a condition).
As I said last week, "don't panic" but do plan. Determine where you may be impacted and spend time to devise an appropriate response.
