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The economic effect the Wuhan coronavirus is having on the U.S.

UArizona professor says we shouldn't worry
Posted at 5:12 PM, Feb 28, 2020
and last updated 2020-02-28 19:16:56-05

TUCSON, Ariz. — Many eyes are on the stock market after the huge point drop this week. But despite the big drop, a local finance professor says we should not worry just yet.

"The market has fallen to the current level of just over 2,900. This has taken place just over the past week," said Chris Lamoureux, the Diamond Professor of Finance at UArizona.

Lamourex said it is important to recognize, the nation was at record highs just before the news of the Wuhan coronavirus hit.

"Especially over the last 18 months or so, the stock market has really gone up quite significantly. So this recent drop does not look as large in the grand scheme of things. What effectively it has done, is place the market, basically, back to where it was about a year ago," said Lamoureux.

Based off the charts, Lamoureux said, we do know market movements are event driven. There is a high correlation between the concerns of the coronavirus growing, while the market is dropping. This type of movement is called "flight-to-quality."

"As investors seek a safe haven, they want to try to find a place to put their money which is very safe," said Lamoureux.

Thanks to the popularity of 401k's, more Americans are invested in the stock market. But Lamoureux believes, right now, the average person should not worry about this change since the stock market is fickle.

"So there is certainly some anxiety about what this recent strain of virus being introduced to humans, what the effect on our economy could be. In terms of our financial activity, I don't think that any of us should react, certainly we don't want to overreact to recent market price movements," said Lamoureux.