Coronavirus Has Mixed Impact on Michigan’s Economy
Alex McLenon | NPR WDET 101.9FM| Mar 12th, 2020
Sam Huszczo is a financial advisory and founder of SGH Wealth Management. He tells WDET’s Alex McLenon that while Wall Street is preparing for the worst case scenario, it could be a while before any severe economic impacts are felt in Michigan.
Alex McLenon, 101.9 WDET: What are we seeing happen with the stock market and how does it relate to coronavirus?
Sam Huszczo, SGH Wealth Management: Investors are trying to figure out what could be the high end implications of supply chains, travel being reduced, and any other ancillary spill off of what could be the worst case scenario of that. When items are at its most uncertain point is usually when we can allow our mind to get into the worst case scenario of things.
So what’s actually happening is us considering what those worst case scenarios are. But much is still far too uncertain to make any real claims as to make any claims as to how bug the impact of this could be. But certainly emotions have set in, and that’s the reasons why we’ve seen the runoffs that we’ve seen.
Over the weekend one of the newest developments was what’s going on with Moscow and OPEC. Can you explain what’s happening there?
Oil has gotten crushed this year outside of even what’s happening in negotiations and things of that nature. OPEC I’d say is losing some of its power, just in that the United States is a big oil player now as well too. So I wouldn’t be surprised if other regions are testing OPEC’s metal in a time like this.
But honestly, the biggest item to keep this economy going forward in our opinion is just consumption. One thing that does give us confidence is that unemployment is super low. So as long as everybody still has jobs and Americans act American and they spend a big portion of their paychecks – consumptions alone could propel this economy forward.
Could that spending be hindered by fears of coronavirus?
Yeah, I mean it is interesting to that degree. The biggest consumer sentiment survey is just the University of Michigan consumer sentiment survey, which we read religiously. Two weeks ago only 8% of respondents mentioned the coronavirus as an issue. The most recent one last Friday, that jumped up to 20% of respondents mentioning the coronavirus.
So certainly it’s a lot more in our forefront and maybe even higher at the end of this week as well. But to put that into context, consumer sentiment is 7.7% higher than it was one year ago today. How that couples with the panic of coronavirus? It’s a hard thing to decouple but I would say that people are a little bit more confident than they were a year ago at the very least.
How could people expect to see the impact of what’s going on with the stock market? Be it a fear reaction or over reactions or what not, how could it fall back down to the local level and what are some ways that people might notice it?
The way that coronavirus reacts in terms of number of cases and fatality levels, those numbers need to be watched very closely over the next 9 to 12 weeks. But in terms of Detroit local, I mean, I’m a long time Detroiter. I wish we had more of a tourism area in the Detroit region at least, but tourism is going to be down dramatically.
Everything else is gonna have to do with supply chains. Obviously being a part of the automakers, anyone involved with sourcing from China or anything like that, that could get a lot more difficult. But, if this does last a long time and some of that manufacturing shifts to making items in the United States again, the net result for us as citizens would be prices going up.
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