Since the mass transference of the novel coronavirus (COVID-19) across nations, stock markets internationally have been dropping drastically.
To understand why this is happening, it is important to first understand what a stock market price represents. Essentially, the stock price represents the expectation on the profits a company makes.
“What will [COVID-19] do to the stock market? Well, the big question to answer that, you have to first ask, ‘Was it expected?” said Alexandre “Sasha” Skiba, associate professor for the College of Business at the University of Wyoming.
Skiba said there were three possible reasons for COVID-19’s impact on the stock market: the virus caused a disruption in the markets, there was an expected reduction of profits and volatility.
“The number one big thing is the stock markets crashed because COVID[-19] has expected strong effects on the profitability of the public trade of companies,” Skiba said.
The coronavirus has predicted that some companies may not make as much profits as others. For example, the Boeing Company stock (a company that designs, manufactures and sells aerospace) has seen some steep declines in the past month.
COVID-19 has made air travel unpredictable, so Boeing is not selling as many products. If they sell half as many aerospace products as they normally do, their profit will be half as big. But the profit does not end there because they still have accruing costs for producing their products.
Skiba put it into terms of students paying rent.
“If you don’t have a job, you still have to pay rent,” he said.
This also happens to companies. If companies are unable to sell their products, they will not get those profits and that value does not benefit the company. If profits cannot benefit the company, stocks may begin to be sold because people believe the profits will be low.
However, as of April 6, the Boeing Company stock is slowly rising. Skiba described this as volatility, or a measure of fluctuation in the stock market price.
“The volatility tells us there is a lot of uncertainty in the market,” said Skiba.
A stock is basically sharing the ownership of the company, and people buy and sell stocks based on how they expect the company to make profit. If stock prices go down – like many are in lieu of COVID-19 – that means people are selling stocks. If prices go up, however, that means people are buying stocks.
Every transaction has a buyer, Skiba said. This up and down fluctuation of stocks being bought and sold shows the uncertainty in the market of people wondering how well the company will profit, based on circumstances.
This impact of the stock market, Skiba said, can impact students in a direct way and an indirect way. The direct way is if a student has some of their wealth tied to the stock market. The indirect could be through their parents’ wealth, whether their parents need to work longer and hold off retirement or they need to adjust their assets.
The economy will also be impacted by the stock market, which in turn can affect students when they go into the job market. Skiba said that students who are entering the labor force in the next year or two could be catching the tail end of their market.
“[Catching the tail end] means that if [students] start working next year or the year after and the stock prices are still low, it will be increasingly important that they start saving early,” Skiba said.
Skiba connected the COVID-19 situation with some of his own experiences, those being the Chernobyl Disaster in Ukraine and the breakdown of the Soviet Union in the 1990’s. He said that if he was able to draw parallels, it shows how bad this situation is.
“Let’s listen to those who know more about this than we do,” Skiba said, speaking about experts in this area.
For students dealing with the repercussions of COVID-19 indirectly or directly, Skiba advised for students to communicate with their teachers and people they normally would not, to adjust their expectations and use this downtime for things they would not normally do, like learning a new language.
Skiba has also adjusted to the impacts of the virus. He has been spending more time with his daughters, learning to cook new things and taking mental notes on empathy, reaching to people, being more patient, kind and forgiving.
“This is a big change for me,” he said, “but it’s also a big change for [students], so how can I make it easy?”
