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The stock market crashed to its worst day yesterday since 1987’s infamous “Black Monday.” WHRV’s Jonah Grinkewitz spoke with Old Dominion University economist Robert McNab about how uncertainty is fueling the current crisis.

Jonah Grinkewitz: Professor McNab, thank you for joining us. What happened yesterday and why is the market so volatile right now?

Robert McNab: What we're seeing right now is markets voting with money about their confidence in the response of the federal government with regards to the emergence of COVID-19 in the United States. What we've seen is (a) lack of information on the nature and extent of the crisis. And since markets are forward-looking, they need transparent, correct information to value companies. In the absence of information, fear takes over and people gravitate towards a worst case scenario.

JG: How is this different from 2008?

RM: The way to think about this is the difference between a car crash and a ski accident where you start tumbling at the top of a hill. In 2008, we essentially had a car crash. The economy fell into a credit crisis, and once the signs of the credit crisis emerged, we saw the failures of banks on Wall Street and we saw foreclosures start to rise. We understood very quickly the extent of the crisis, what was causing the crisis and how aggressive we would need to be to mitigate the crisis in the short term. The problem here is that there's just a huge amount of uncertainty. How many people are infected? For example, in the United States, what is the actual mortality rate for infections? What demands is that going to place on our healthcare system?

JG: What would you tell people who are worried about their retirement funds?

RM: The best advice I can give you on your retirement funds is: don’t panic. Especially if you are in the market for the long term. What we’ve seen since WWII is that in most cases after an economic shock equity markets have recovered in two years. This is going to be unsettling. You’re going to wake up with an upset feeling in your stomach. But we just kind of need to take a deep breath and realize that we will get through this. And when we get through this, the equity markets will recover.

JG: Many companies are moving to a work from home policy, but for a lot of businesses that just isn't possible. What happens if we put our economy on hold?

RM: The calculus here is fairly clear. You need to be very aggressive in terms of public health actions to flatten the curve, even if it's economically disruptive in the short term. The alternative is much more economic disruption over the longer term. We can be very cognizant that we are making decisions based upon factual information and we as consumers can say, okay, I know this is disruptive. I know I'm going to miss my sports. I'm going to miss my music festival. I know that we're going to have disruptions in terms of jobs, but it will prevent, hopefully, my grandfather or grandmother or relatives from getting sick. Worst case scenario is that we don't aggressively pursue social distancing and other actions to mitigate the spread. Then we are dealing with this for a much longer period of time, which would mean that we're talking much more about the likelihood of a recession in the latter half of the year than a recovery.