The Ides of March is the 74th day on the Roman calendar that corresponds to March 15. The Romans considered the Ides of March a deadline for settling debts but if you’ve heard of the Ides of March, it’s probably thanks to it being famously dramatised in William Shakespeare’s play Julius Caesar. Caesar is warned by the soothsayer to “beware the Ides of March” and was later betrayed and stabbed to death on that date. Because of this, the date has become synonymous with bad luck, betrayal and unwelcome surprises. This year that warning would have been very fitting.

On Sunday, March 15, 2020 the US Federal Reserve (the Fed), in an expected move, cut its target interest rate to a range of 0 to 0.25 per cent, returning interest rates to the record lows they reached during the 2008-09 recession and its aftermath. This was the largest emergency reduction in the Fed’s more than 100-year history and the first time the US central bank has reduced rates at an unscheduled meeting within 13 days of each other.

The first of these emergency cuts designed to prop up the economy was on March 3.

In addition to cutting rates, the Fed also introduced a massive quantitative easing programme through which it will buy US$700 billion in Treasury and mortgage-backed securities over coming months.

These moves reflect the growing concerns about the economic impact of the coronavirus.

Recall that the Federal Reserve funds rate, often colloquially called the Fed rate, is the primary mechanism through which the Fed influences the American economy. The Fed has historically raised rates during economic expansions to control inflation and prevent the economy from “overheating”. But during times like now, when there are growing concerns about the economic slowdown that is taking place as a result of the coronavirus, lowering the rate is meant to stimulate economic activity by making it cheaper to borrow and spend.

However, after the first emergency rate cut on March 3, the US stock market managed to rally only for roughly 15 minutes before falling sharply once again and finishing the day down nearly three per cent.

The market reaction was even worse after the second emergency cut on March 15. Instead of soothing the market, it reignited fears that the Fed’s action to cut rates ahead of its scheduled meeting meant the economy was far worse than previously believed and markets sold off sharply once again. It was so bad that the mounting losses briefly triggered the market’s circuit breaker mechanism, halting trading soon after opening.

In 2008 the solvency of banks was core to the crisis because of the implosion of sub-prime mortgages. The effects on economy were widespread but the housing and mortgage sectors were the worst hit.

The 2020 COVID-19-induced crisis will also be widespread, but this time the banking system is not a major area of vulnerability.

The most severe consequences will be concentrated in the transportation and hospitality sectors, the energy sector due to the ongoing price war between the major oil players, as well as the global slowdown in growth. However, virtually every corner of the economy will be temporarily under stress due to the widespread implementation of social distancing practices.

These are indeed times of great uncertainty, but the key is not to panic.

If you are a novice investor it is better to not react at all. By reacting you are far more likely to make a decision that costs you money than one that will help you.

If you are a seasoned investor or have the guidance of a trusted financial advisor, you could look at this situation as an opportunity to buy. Yes, you heard me correctly! If you are invested in mutual funds, unit trusts or ETFs and the price has fallen below where you had previously purchased your units/shares, you could use the opportunity to average down your purchase price.

Toni-Ann Neita-Elliott, CFP is the AVP – Personal Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in US dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm Feedback:  If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at: info@sterlingasset.net.jm

There are also good-quality bonds that have declined in price and are offering attractive yields. However, it is possible that yields could increase further (meaning prices could decline even more), thus providing even more attractive entry points. So, talk to your investment advisor to see if there are any opportunities that are right for you.