Latest Economic Review: Sunpointe Illuminations

Behavioral Finance and the Coronavirus Bear Market

On March 11, 2020, COVID-19 was declared global pandemic, and by March 20, US and global equity markets had officially moved into a “bear market” state following losses of more than 20%. Market volatility and repeated days of market loss wreak havoc on the psychology of market participants. The good news is that markets recover relatively quickly from exogenous epidemic events, such as the 2020 novel coronavirus. Despite the discomfort caused by short-term volatility, it is important to stay invested and not to deviate from long-term strategic plans.

This article seeks to give some behavioral finance explanations of why this angst is happening and some perspective on bear markets—so that investors can reduce panic and make sound investment decisions.

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